By Jenny W. Hsu 
 

Oil prices crept higher in Asia Tuesday in thin volume as market players held back their bets ahead of more data points to trade on.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $54.15 a barrel at 0156 GMT, up $0.10 in the Globex electronic session. April Brent crude on London's ICE Futures exchange rose $0.18 to $56.11 a barrel.

Oil prices made scant gains overnight on signs that participants in an Organization of the Petroleum Exporting Countries-led production cut agreement are fulfilling their pledges. A Russian news agency Tass reported that Russia, a heavyweight oil producer that joined the pact, is expected to show a 117,000 barrel reduction in February from the previous month.

Compliance to the production agreement is proving both a boon and bane for the oil market. Data so far shows a 90% compliance rate, reinforcing views that the supply will be become tighter under this plan.

"With the prospect of OPEC extending the current cuts even longer, we would expect to see prices continue to push higher from here," ANZ said in a note.

However, as the six-month production pact has only been in force since January, some market observers are skeptical how much longer would the members stay committed to the agreed.

In the past, commitment by cartel members has flamed out when oil prices edged higher or when they felt their market share was being threatened.

This concern is well warranted given that shale production in the U.S. is increasing and producers there are undertaking cheaper and more efficient methods to crank up production. U.S oil producers, once banned from selling their products abroad, are expected to boost their exports in the coming years.

Moreover, with domestic demand growth near flat, U.S. crude inventories remains bloated, albeit expanding at a slower pace.

Citi Futures forecasts U.S. crude stocks grew by 3 million barrels for the week ended February 24. If confirmed by the U.S. energy department on Wednesday, the build would be far below the 10.4 million barrels seen in the same week last year, but "still enough to remind the market that inventories are in a seasonal uptrend that could have another two months to run."

For now, many commodities traders are awaiting U.S. President Donald Trump's speech at the Congress Tuesday evening in Washington D.C. He is expected to touch on plans for overhauling the tax code, boosting defense spending, and revamping the health insurance system.

Nymex reformulated gasoline blendstock for March--the benchmark gasoline contract--was unchanged at $1.5327 a gallon, while March diesel traded at $1.6425, 26 points higher.

ICE gasoil for March changed hands at $497.25 a metric ton, unchanged from Monday's settlement.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

February 27, 2017 22:44 ET (03:44 GMT)

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