Oil rose on Thursday after a survey showed OPEC’s commitment to its supply cuts remains in place, even as US production topped 10 million barrels per day (bpd) for the first time since 1970.
On its first day as the front-month, Brent futures for April delivery gained 76 cents, or 1.1 percent, to settle at $69.65 a barrel, while U.S. West Texas Intermediate (WTI) crude for March delivery jumped $1.07, or 1.7 percent, to settle at $65.80.
That put both crude futures contracts close to their highest levels since December 2014.
In January, both benchmarks rose for a fifth month in a row with Brent up 3.3 percent and WTI up 7.1 percent, marking the strongest start to a year for Brent in five years and WTI in 12 years.
“Oil is up today because of OPEC’s reinforced commitment for 2018,” said Brian Kessens, a portfolio manager and managing director at Tortoise in Leawood, Kansas.
Oil output in the Organization of the Petroleum Exporting Countries (OPEC) rose in January from eight-month lows as higher output from Nigeria and Saudi Arabia offset declines in Venezuela and strong compliance with the OPEC-led supply pact, according to a Reuters survey.
“The OPEC compliance for January was elevated but there are real questions going forward given the outsized participation of Venezuela,” John Kilduff, partner at energy hedge fund Again Capital LLC in New York, said.
Oil output in Venezuela has been declining amid an economic crisis. The country produced about 1.6 million bpd in January, according to the Reuters survey, putting its output well below what it pledged to cut.
While OPEC complies with its production cut agreement, U.S. crude output surpassed 10 million bpd in November for the first time since 1970, the Energy Information Administration said on Wednesday.
“We expect U.S. crude oil output to grow in 2018 at nearly a million bpd more than last year. Buckle up, because the United States is on track to become the largest oil producer in the world by the end of this year,” Kessens at Tortoise said.
Also supporting Thursday’s crude market was a note from Goldman Sachs boosting their oil price target.
Goldman Sachs raised its three-month forecast for Brent to $75 from $62 and its six-month forecast to $82.50 from $75.
Oil prices, however, are unlikely to advance much above $70 a barrel in 2018, given the tug of war between OPEC and the U.S. shale industry, a Reuters poll showed on Wednesday.