Oil prices had been rising prior to the EIA report on news that OPEC's leading producer, Saudi Arabia, told some of its Asian customers that it will reduce their crude supply slightly in February, according to Reuters. While this is a positive sign that OPEC members are adhering to the cuts, there is still concern that other members will not comply.
Traders will continue to monitor how U.S. companies are responding to OPEC's production cuts with the Baker Hughes (BHI) rig count on Friday, which is seen as an important barometer for drilling activity across the U.S. and North America. Last week, U.S. oil producers added 4 rigs, while gas producers brought 3 rigs online, bringing the overall count up to 665. West Texas' lucrative Permian Basin saw the biggest increase in rigs, climbing by three, which brought the total up to 267 rigs -- the most of all the major domestic basins.
"We believe last month's surprising OPEC policy change has effectively established a $50 a barrel floor on oil prices, providing operators the confidence to increase upstream spending, particularly onshore U.S.," Barclays wrote in a research note on Monday.