Oil prices edge up on Saudi supply cut, but outlook remains cloudy

Last Updated: Wed, Jan 11, 2017 09:37 hrs
An offshore oil platform is seen at the Bouri Oil Field off the coast of Libya

SINGAPORE  - Oil prices edged up on Wednesday, lifted by a small supply cut by crude exporter Saudi Arabia, but markets remained under pressure from signs that the planned OPEC output reductions were being poorly implemented and as supplies from elsewhere rose.

Prices for Brent crude futures, the international benchmark for oil prices, were trading at $53.77 per barrel at 0130 GMT, up 13 cents from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $50.96 a barrel, 14 cents above their last settlement.

Traders said that the price rises were a result of Saudi Arabia, the world's top oil exporter, telling at least one Asian refiner that it will curb crude supplies slightly from contracted volumes in February.

Despite this, there were doubts that the cuts would be deep enough to rebalance a market suffering from oversupply for the past two years. Both Brent and WTI futures are down around 6 percent since the start of the year.

"Traders continued to fret about rising U.S. supply and compliance by OPEC to agreed-upon production cuts," ANZ bank said.

The U.S. Energy Information Administration (EIA) said on Tuesday that American crude production would rise by 110,000 barrels per day (bpd) to 9 million bpd between 2016 and 2017.

Another concern for traders were high U.S. crude stockpiles, with the EIA scheduled to release its latest figures on Wednesday.

"With inventories at the highest seasonal level in three decades, another increase in this week's report could see prices come under further pressure," ANZ said.

Outside the United States, there were lingering doubts over compliance with planned production cuts from members of the Organization of the Petroleum Exporting Countries (OPEC).

OPEC's second biggest producer Iraq plans to raise crude exports from its southern port of Basra to an all-time high in February, keeping shipments high even as OPEC production cuts take effect this month.

Its State Oil Marketing Company (SOMO) plans to export 3.641 million bpd of crude in February, according to trade sources and preliminary loading schedules, potentially beating a record of 3.51 million bpd from December.

Some cuts, however, appear to be coming. In non-OPEC member Russia, which also agreed to cut output, extreme cold as low as minus 60 degrees Celsius has helped to knock out production by around 100,000 bpd in the first few days of January, and many oil engineers expect more reductions as production facilities struggle to cope with the extreme conditions.

More from Sify: