Oil prices extend gains as OPEC cuts output forecast

Washington: Oil prices advanced further on Monday as OPEC forecast a reduction in US output amid a dip in North American crude production. US benchmark West Texas Intermediate (WTI) for delivery in March jumped $1.17 to $52.86 a barrel compared with Friday's close. Brent North Sea crude for March won 54 cents to stand at $58.34 a barrel in late London trade.

Oil prices gained fresh support "after OPEC lifted its non-OPEC supply forecast for 2015," said Jasper Lawler, analyst at dealing group CMC Markets. “OPEC's forecasts may be self-serving but this latest one does have some basis in fact. The US rig count has been coming down and most major oil companies have announced" cuts to expenditure, Lawler said.

The Organization of Petroleum Exporting Countries forecast non-OPEC oil supply growth of 850,000 barrels per day for 2015, down from its previous estimate and led by a cut in US output. A survey by US oil services firm Baker Hughes Inc released on Friday showed that the number of rigs drilling for oil in the United States fell by 83 to 1,140 in the week to February 6. The dip followed a cut of 94 rigs the previous week.

The drop, coupled with announcements of deep cuts in capital spending by major oil companies, suggests tighter supplies in the future. Oil prices are down by about 50 per cent from their June peaks, largely owing to a surge in global reserves boosted by robust production of oil from US shale rock.