Oil prices edge higher on more balanced market
OPEC, rivals announced cuts of almost 1.8m bpd
Oil prices rose yesterday as a weaker dollar and the delay of new Libyan oil exports boosted benchmarks, amid expectations of tighter crude supply going into 2017.
Brent crude futures traded at $55.47 per barrel at 0946 GMT, up 26 cents from their last close. US West Texas Intermediate (WTI) crude futures were up 30 cents at $52.20 a barrel. Analysts said the increases, which built on gains of around 2 percent on Friday, were driven by a delay in crude oil supplies from Libya. “It looks like the Libyan story and the weaker US dollar are counterbalancing” bearish factors, said Tamas Varga, analyst with PVM Oil Associates. “We should expect higher prices in the near-term future.” Late last week, a group guarding oil infrastructure in Libya said it had reopened a long-blockaded pipeline leading from the oilfields of Sharara and El Feel, but a separate group had prevented a production restart at El Feel. Additionally, the US dollar fell back against a basket of other currencies since hitting 2002 highs last week. A strong dollar makes oil more expensive for holders of other currencies.
Some expected the strength in oil prices to continue into early 2017 due to a deal between the Organization of the Petroleum Exporting Countries and other producers to cut almost 1.8 million barrels per day (bpd) in oil output from January. “With investors now expecting a relatively high level of compliance with the production-cut agreements, prices should be well supported,” ANZ bank said yesterday. Despite this, there were factors that cast a shadow on markets, preventing prices from rising more.
In the United States, which did not participate in the output-reduction deal, drilling for new oil has increased for seven straight weeks. Drillers added 12 oil rigs in the week to Dec. 16, bringing the total count to 510, the highest since January, though still below 541 rigs a year ago, energy services firm Baker Hughes said on Friday.
“Since its trough on May 27, 2016, producers have added 194 oil rigs (+61 percent) in the US,” US bank Goldman Sachs said. As a result, US. oil production is edging up, rising from below 8.5 million bpd in July to almost 8.8 million bpd by mid-December. — Reuters