Oil prices surge in opening trade of new year

OIL prices rose in the first trading hours of 2017, buoyed by hopes that a deal between Opec and non-Opec members to cut production, which kicked in on Sunday, would be effective in draining a global supply glut.

International Brent crude oil prices were up 16c, or 0.3%, at $56.98 a barrel at 8.02am GMT yesterday – close to last year’s high of $57.89 per barrel, hit on December 12.

Oil markets were closed on Monday after the New Year’s holiday.

US benchmark West Texas Intermediate crude oil prices were up 22c, or 0.41%, at $53.94 a barrel, not far from last year’s high of $54.51 reached on December 12.

January 1 marked the official start of the deal agreed by the Organisation of Petroleum Exporting Countries (Opec) and nonOpec member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day (bpd).

Market watchers said January would serve as an indicator for whether the agreement would stick.

“Markets will be looking for anecdotal evidence for production cuts,” CMC Markets chief market analyst Ric Spooner said.

“The most likely scenario is Opec and non-Opec member countries will be committed to the deal, especially in early stages.”

Libya, one of two Opec member countries exempt from cuts, increased its production to 685 000 bpd as of Sunday, up from around 600 000 a day in December, according to the National Oil Corporation.

Elsewhere, non-Opec Middle Eastern oil producer Oman told customers last week that it would cut its crude term allocation volumes by 5% in March.

Non-Opec member Russia’s oil production in December remained unchanged at 11.21 million bpd, still near a 30-year high, but it was preparing to cut output by 300 000 bpd in the first half of 2017 in its contribution to the production cut accord. — Reuters