Oil prices on track for
biggest yearly gain since 2009
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[December 30, 2016]
By Sabina Zawadzki
LONDON
(Reuters) - Oil prices are on track for their biggest annual gain since
2009 after the OPEC grouping and other major producers agreed to cut
crude output to reduce a global supply overhang that has depressed
prices for two years.
U.S. benchmark West Texas Intermediate (WTI) crude futures were up 6
cents at $53.83 a barrel by 1100 GMT (6:00 a.m. ET) on Friday, while
Brent front-month March crude stayed flat at $56.85.
Brent has risen about 50 percent this year and WTI has climbed around 43
percent, the largest annual gains since 2009, when Brent and WTI rose 78
percent and 71 percent respectively.
Oil has more than halved since the summer of 2014, when it was above
$100 a barrel. The fall in prices due to oversupply, in part thanks to
the U.S. shale oil revolution, was accentuated later that year when
Saudi Arabia rejected any OPEC deal to cut output and instead fought for
market share.
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But a new OPEC agreement to reduce production, struck over three months
from September this year, marks a return to the 13-country group's old
objective of defending prices although doubts remain as to its
effectiveness in implementation.
In a sign that producers are adhering to the six-month cut starting in
January, Oman told some customers it will reduce term allocations by 5
percent in March, but did not say whether the supply reduction would
continue after that.
Equally as important to oil prices next year will be the development of
demand globally, and major forecasters diverge in their predictions.
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A worker fills a tank with subsidized fuel at a fuel station in
Jakarta April 18, 2013. REUTERS/Beawiharta
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"We see a big variation in demand growth assessments for 2017, ranging from
+1.22 million bpd (barrels per day) ... to +1.57 million b/d," analysts at JBC
said in a note to clients.
"Overall, all forecasters agree that Asia will remain the main engine for demand
growth. Yet, there is no consensus on the extent of Chinese and Indian
year-on-year demand growth."
Oil will gradually rise toward $60 per barrel by the end of 2017, a Reuters poll
showed on Thursday, with further upside capped by a strong dollar, a likely
recovery in U.S. oil output, and possible non-compliance with agreed cuts.
The market on Friday shrugged off an unexpected increase in U.S. crude
inventories, which rose 614,000 barrels in the week to Dec. 23, U.S. Energy
Information Administration data showed. Analysts had expected a decrease of 2.1
million barrels.
Still, the rise in crude stocks was significantly smaller than in Wednesday's
American Petroleum Institute data that indicated a 4.2-million-barrel build in
the same period. []
(Additional reporting by Mark Tay; Editing by Dale Hudson)
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