Crude prices edged up in early Friday trade following reports that major producers have started cutting production as pledged, strengthening views the global oil glut was ebbing.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLH7, 0.07% traded at $53.09 a barrel, up $0.05 in the Globex electronic session. March Brent crude LCOH7, 0.09% on London’s ICE Futures exchange was flat at $56.01 a barrel.
Oil prices have seesawed since the Organization of the Petroleum Exporting Countries and 11 non-bloc players agreed late last year to cut production. The pact, if fully implemented, could wipe out about 1.8 million barrels of excess oil a day. However, skepticism over participation nations’ commitment has kept prices from rising higher.
Saudi Arabia, OPEC’s de facto leader, said Thursday it has slashed its production to under 10 million barrels a day. If confirmed, the reduction would be more than the 486,000-barrel-a-day cut it had promised. The OPEC monthly report on January production will be released in mid-February.
The kingdom has also notified its Asia customers it would reduce supply to the region in February, according to reports.
“This was followed by comments from Russia’s Energy Minister Alexander Novak that Russia also cut its January oil production,” ANZ Research said, noting that Algeria also announced it has deepened its cut to 60,000 barrels a day from 50,000 barrels a day.
According to BMI Research, the compliance rate among the signatories is currently 73%.
“Saudi Arabia will do everything it can to make sure global prices stay on a good level before its state-own oil company goes public next year even if it means it needs to cut more of its production,” said a Chinese fuel-oil trader based in Singapore.
Oil prices also got a boost from Chinese crude imports, which jumped 14% in 2016 from the previous year to 381.01 million metric tons, or roughly 7.65 million barrels a day.
China is seen as a major growth driver for the global crude market, based on the International Energy Agency’s forecast. Analysts say China’s import volume will likely stay elevated even though growth might slow due to a high comparison base.
“China’s crude imports will likely see another double-digit growth in 2017 due to strong refinery demand,” said Nelson Wang, an energy analyst at investment firm CLSA.
China National Petroleum Corp., one of China’s top state-owned energy giants, said Thursday the country’s reliance on foreign crude is expected to hit a new high in 2017, surpassing 65%. In November, the National Bureau of Statistics said the country’s reliance on foreign oil was at 65.3%.
Nymex reformulated gasoline blendstock for February RBG7, 0.24% — the benchmark gasoline contract — rose 42 points to $1.6150 a gallon, while February diesel traded at $1.6776, 20 points higher.
ICE gasoil for February changed hands at $494.25 a metric ton, up $1.75 from Thursday’s settlement.