Oil hits 18-month highs
as markets eye output cuts
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[January 03, 2017]
By Christopher Johnson
(Reuters) - Oil prices hit 18-month highs on Tuesday, the first trading
day of 2017, buoyed by hopes that a deal between OPEC and other big oil
exporters to cut production, which kicked in on Sunday, will drain a
global supply glut.
Benchmark Brent crude jumped more than 2 percent to a high of $58.37, up
$1.55 a barrel and its highest since July 2015. By 1230 GMT, Brent had
eased to $58.07, up $1.25.
U.S. light crude oil hit an 18-month high of $55.24, up $1.52 a barrel,
also its highest since July 2015, before slipping to around $54.95.
Oil futures exchanges were closed on Monday for New Year public
Jan. 1 marked the official start of a deal agreed by the Organization of
the Petroleum Exporting Countries and other exporters such as Russia to
reduce output by almost 1.8 million barrels per day (bpd).
"First signals suggest the OPEC and non-OPEC production cuts are raising
hopes that the global oil oversupply will diminish," said Hans van Cleef,
senior energy economist at ABN AMRO Bank N.V. in Amsterdam.
Ric Spooner, chief market analyst at CMC Markets, agreed:
"Markets will be looking for anecdotal evidence for production cuts," he
said. "The most likely scenario is OPEC and non-OPEC member countries
will be committed to the deal, especially in early stages."
Investors will be watching OPEC very closely to see whether the group's
members keep their promises to reduce production:
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Fuel pump nozzles are pictured at a Helios petrol station in Almaty,
Kazakhstan, June 10, 2016. REUTERS/Shamil Zhumatov
2016 was the year of words, 2017 must be the year of actions," said Tamas Varga,
senior oil analyst at London brokerage PVM Oil Associates.
Libya, one of two OPEC countries exempt from the output cuts, has increased its
production to 685,000 bpd, from around 600,000 bpd in December, an official at
the National Oil Corporation said on Sunday.
Elsewhere, non-OPEC Middle Eastern oil producer Oman told customers last week
that it would cut its crude oil term allocation volumes by 5 percent in March.
Non-OPEC Russia's oil production in December remained unchanged at 11.21 million
bpd, 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 accord.
(Additional reporting by Jane Chung in Seoul; Editing by Louise Heavens and
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