Oil prices have dropped after initially rising this morning as US production growth overshadows Opec's promised production cuts.
This morning, global benchmark Brent crude futures were up more than one per cent to $55.82 per barrel, while West Texas Intermediate (WTI) increased to $53.29 before both fell slightly towards the afternoon.
Currently, Brent crude is trading at $55.37 per barrel while WTI futures slid to $52.97.
Members of the Organisation of the Petroleum Exporting Countries (Opec) and non-member producers met Sunday to confirm they're sticking to their deal of cutting production by 1.8m bpd. The cartel said 1.5m barrels per day (bpd) has already been cut.
Global oil inventories declined by 24m barrels to 5.7bn barrels in the fourth quarter of last year, Bernstein Energy said. That amounts to about 60 days of world oil consumption, Reuters reported.
"This is the biggest quarterly decline since the fourth quarter of 2013, confirming that inventory builds are now reversing as the market shifts from oversupply to undersupply," Bernstein analysts said in a note to clients.
The cuts are being offset by an increase in US oil production, which has risen by more than six per cent since the middle of last year. The US added the most rigs in nearly four years, data from energy services company Baker Hughes showed.
However, the impact on the market is not expected to be felt immediately, said Fawad Razaqzada, an analyst for Forex.com. "The trend therefore remains bullish for oil," he said in a statement.