Oil steadies above $55 ahead of supply
cut deal
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[December 27, 2016]
By Alex Lawler
LONDON (Reuters) - Oil steadied above $55 a
barrel on Tuesday, drawing support from expectations of tighter supply
once the first output cut deal between OPEC and non-OPEC producers in 15
years takes effect on Sunday.
Jan. 1 is the official start of the deal agreed by the Organization of
Petroleum Exporting Countries and several non-OPEC producers to lower
production by almost 1.8 million barrels per day (bpd).
Brent crude <LCOc1> was unchanged at $55.16 a barrel at 1128 GMT (6:28
a.m. ET) . The global benchmark reached $57.89 on Dec. 12, the highest
since July 2015. U.S. crude <CLc1> gained 15 cents to $53.17.
There was no trading on Monday after the Christmas holiday, and volume
was expected to be light on Tuesday. Crude may struggle to rally much
further before evidence is available of OPEC's compliance with the cuts,
analysts said.
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"To go above $60 is going to be difficult. We're already close to the
top rather than the bottom of the range right now," said Olivier Jakob,
oil analyst at Petromatrix.
"From January, we'll start to have a better idea about the level of OPEC
production. That is going to be more and more of a focus."
Major OPEC members such as Saudi Arabia and Iraq have informed customers
of lower supplies. But Libya and Nigeria - which are exempt from
reductions because conflict has curbed their output - have been
increasing production.
Libyan output was 622,000 bpd on Monday, up slightly from levels
recorded before an armed faction agreed to lift a two-year blockade on
major western pipelines on Dec. 14, the National Oil Corporation (NOC)
said.
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A gas station attendant pumps fuel into a customer's car at
PetroChina's petrol station in Beijing, China, March 21, 2016.
REUTERS/Kim Kyung-Hoon
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While the outright price of crude is being supported by the prospect
of lower supplies, the impact in the physical market will probably
differ according to the type of crude.
Price differentials for lighter crudes could weaken once the supply
cut comes into force as producers are expected to trim back output
of their heavier grades, analysts at JBC Energy said in a report.
"Going into 2017, we expect that the premiums for light, sweet
grades may be increasingly pressured as a result of the joint OPEC
and non-OPEC output cut agreement which is supposed to reduce
primarily the availability of medium-sour crudes," JBC said.
(Additional reporting by Osamu Tsukimori in Tokyo; Editing by Hugh
Lawson)
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