US crude oil settles roughly flat as OPEC supply cuts offset restart at Libyan field

Oil prices traded roughly flat on Tuesday as OPEC-led efforts to tighten supply offset the restart of Libya’s biggest oilfield and the prospect of weaker demand.

Investor hopes for an imminent trade deal between the United States and China also wavered on mixed comments from the White House.

“Oil is still waiting for a deal to come back to table with China,” said Phillip Streible, senior commodities strategist at RJO Futures.

U.S. West Texas Intermediate crude settled Tuesday’s session 3 cents lower at $56.56. Brent crude, the international benchmark, rose 19 cents to $65.86 a barrel.

Supply curbs by OPEC and its allies were helping to support crude futures. On Monday, Russia said it would speed up its output cuts this month. Also this week, OPEC sources said the group would likely extend its output cut pact, which have helped boost oil prices by more than 20 percent higher this year.

“That’s what holding prices, and that will ultimately drive prices higher,” Streible said.

To prop up the market, the alliance known as OPEC+ has been cutting output by 1.2 million barrels bpd since the start of the year. OPEC+ is likely to achieve its goal of draining oversupply from the market by next month, Jeff Currie, global head of commodities research at Goldman Sachs, told CNBC on Monday.

The actual cut has exceeded the pledged amount because of U.S. sanctions on Iran and Venezuela, plus unrest in Libya that had prompted the closure of El Sharara, giving additional tailwind to prices.

Putting a dampener on the market was the restart of Libya’s El Sharara oilfield, where the aim is to reach initial output of 80,000 barrels per day. The field had been closed since December.

“This will increase the oil production of Libya, and thus of OPEC, by more than 300,000 barrels per day,” said Commerzbank in a report. “The oil market will then be slightly oversupplied again unless production is cut further or unscheduled outages occur elsewhere.”

Oil also slipped earlier on forecasts that the latest round of U.S. inventory reports will show rising crude stockpiles. Six analysts polled by Reuters estimated, on average, that crude stocks rose 400,000 barrels in the week to March 1.

The first supply report is due at 4:30 p.m. ET (2130 GMT) from the American Petroleum Institute (API), an industry group, followed by the government’s official figures on Wednesday.

On Tuesday, energy giants Exxon Mobil and Chevron announced plans to ramp up oil and natural gas output from the Permian Basin, America’s top shale field, in the coming years.

Concern about a slowdown in oil demand growth has weighed on prices. China’s government said it is targeting economic growth of 6.0 to 6.5 percent in 2019, lower than the 6.6 percent growth reported last year and raising the prospect of slowing fuel demand.

Trade negotiations between Washington and Beijing added to market uncertainty.

U.S. Secretary of State Mike Pompeo said President Donald Trump would reject any trade deal that is not perfect, but added the White House would keep working on an agreement. A day earlier, reports that Washington and Beijing could reach a formal agreement in March boosted crude futures.