11 February 2017, New York — Oil prices rose on Friday after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January.
Supply from the 11 members of the Organization of the Petroleum Exporting Countries with production targets under the deal fell to 29.92 million barrels per day, according to the average assessments of the six secondary sources OPEC uses to monitor output or 92 percent compliance.
The International Energy Agency (IEA) – one of OPEC’s six sources – said the cuts in January equated to 90 percent of the agreed reductions in output, far higher than the initial 60 percent compliance with a 2009 OPEC deal.
“Some producers, notably Saudi Arabia, (are) appearing to cut by more than required,” the agency said in a report.
Global benchmark Brent crude LCOc1 settled up $1.07, or 1.9 percent, at $56.70 a barrel. It touched a session high of $56.88.
U.S. West Texas Intermediate (WTI) crude futures CLc1 settled up 86 cents, or 1.6 percent, at $53.86 a barrel.
Another increase in U.S. oil rigs limited gains in the afternoon. Drillers added eight oil rigs in the week to Feb. 10, bringing the total count up to 591, the most since October 2015, energy services firm Baker Hughes Inc (BHI.N) said.
“From a psychological viewpoint, a big number to close above would be $54, and the rig count probably made that a little less likely,” said Phil Flynn, an analyst at Price Futures Group in Chicago, speaking about U.S. crude.
Crude has benefited from recent strength in gasoline prices RBC1 as a glut seems to be gradually eroding.
Gasoline futures 1RBc1 rose 1.3 percent on Friday to $1.59 a gallon.
The IEA, which advises industrial nations on energy policy, said if current compliance levels hold, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day (b/d) in the next six months.
The agency also raised global oil demand growth expectations for 2017 to 1.4 million b/d, up 100,000 b/d from its previous estimate.
Nevertheless, producers will probably have to extend the production cuts beyond six months if they want to achieve their goal of balancing the oil market.
*Devika Krishna Kumar; David Gaffen; Karolin Schaps; Henning Gloystein; Editing: Lisa Von Ahn & David Gregorio – Reuters