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Oil prices continue to rise as Opec reductions take effect

Opec and other producers due to reach 1.8m barrels-a-day reduction target next month

Oil-producing nations are likely to fully comply with the reduction deal, with curbs due to bring global crude markets into balance early this year. Photograph: iStock

Fri Jan 27 2017 - 16:08

Oil headed for a second weekly increase as Opec and other producing nations continued with output cuts to reduce bloated global inventories and stabilise the market.

Front-month futures rose 0.4 per cent in New York and are up 3 per cent for the week, set for the biggest weekly advance since December 2nd.

Opec and other producers are due to reach the 1.8 million-barrel-a-day reduction target next month, Algeria's energy minister Noureddine Boutarfa said on Thursday.

Nations are likely to fully comply with the deal and the curbs will bring global crude markets into balance early this year, Kuwait’s oil minister said on Wednesday.

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Oil has fluctuated above $50 a barrel since 11 nations including Russia last month joined with the Organisation of Petroleum Exporting Countries to trim supply.

While Saudi Arabia says more than 80 per cent of the targeted cuts have been implemented since the deal took effect on January 1st, the International Energy Agency predicted a gain in US shale output as prices rise.

"The market is really starting to gel with the idea that Opec compliance is going to be less of an issue than it has been in the past," said David Lennox, a resources analyst at Fat Prophets in Sydney.

“With US output increasing, it will be difficult for the oil price to have any strong, sustainable rally.”

West Texas Intermediate for March delivery was at $54 a barrel on the New York Mercantile Exchange, up 22 cents, at 7:59am in London.

Total volume traded was about 56 per cent below the 100-day average. The contract gained $1.03 to $53.78 on Thursday.

Front-month prices have averaged about $52 a barrel since the start of December.

Brent for March settlement rose 18 cents to $56.42 a barrel on the London-based ICE Futures Europe exchange.

The contract added 2.1 per cent to close at $56.24 on Thursday. The global benchmark crude traded at a premium of $2.44 to WTI.

- Bloomberg

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