Oil prices have increased due to a drop in US production and lower crude inventories despite concerns that a 13% rally since December may have completed.

Brent crude futures LCOc1 grew 27 cents to touch $69.47 a barrel, while US West Texas Intermediate (WTI) crude futures CLc1 inched up 37 cents to stand at $63.94, reported Reuters.

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PVM Oil Associates analyst Tamas Varga was quoted by the news agency as saying: “The undeniable fact is that (US) crude oil inventories are at their lowest level since August 2015.

“OPEC is edging ever closer to its desired target of reducing OECD industrial stocks to the five-year average.”

Data released by the US Energy Information Administration yesterday indicated a 5 million barrel drop in crude inventories to 419.5 million barrels in the week of 5 January.

US production dropped by 290,000bpd to 9.5 million bpd although there were hopes that the output may cross ten million bpd mark.

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“OPEC is edging ever closer to its desired target of reducing OECD industrial stocks to the five-year average.”

This drop is expected to be for the short-term, as extreme cold weather has halted onshore production in North America.

Output cuts led by OPEC and other oil production nations such as Russia, which started in January last year and to continue throughout this year, have supported the prices.

However, pressure remained in the market as OPEC’s second and third-largest producers, Iran and Iraq slashed their prices to stay competitive. Fuel stocks in Asia and the US stayed ample.

US gasoline inventories inched higher than the expected 4.1 million barrels, according to EIA data.

At Singapore oil trading hub, the average profit margins were just below $6 a barrel, which is the lowest seasonal level seen over the last five years.