By Jenny W. Hsu

Crude futures ticked marginally higher in muted trading in Asia on Tuesday morning as the market remains optimistic ahead of a landmark effort by oil producers to reduce global supply.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $53.17 a barrel at 0213 GMT, up $0.15 in the Globex electronic session. February Brent crude on London's ICE Futures exchange rose $0.04 to $55.20 a barrel. Oil markets were closed on Monday for the Christmas holiday.

Starting January, most members of the Organization of the Petroleum Exporting Countries and 11 other non-cartel producers will start scaling back their production as part of a deal they made in the end of November. The reduction goal of roughly 1.8 million barrels will be carried out in phases.

Oil prices have enjoyed a steady rise throughout December and analysts believe prices will breach the $60-a-barrel threshold in the first half of 2017.

"At this point, most market watchers are optimistic that participating nations will comply [with] the production quotas in the first few months," said Gao Jian, a commodities analyst at SCI International.

However, it remains to be seen if the compliance will hold up once prices edge higher, he added, saying an important indicator would be inventory levels of these countries.

According to the pact, the agreed parties are obligated to cut production, but exports remained untouched. This means these producers will have to rely on their existing inventories to sell their barrels.

A key development would be production growth by Libya, an OPEC nation that was exempt from theround of cuts as its output has been stunted by yearslong militant attacks. A Reuters report says the African nation's production last stood at 622,000 barrels a day, more than double the 300,000-barrel level seen at some points this year. During its peak, Libya's production registered more than 1.6 million barrels a day.

Last week, Libya said that recently revived pipelines could add 270,000 barrels a day to production. If confirmed, the additional production would cancel out almost a quarter of OPEC's promised cut.

Another factor that could thwart OPEC's goal to tamp down global supply would be steady growth from the U.S. The number of U.S. rigs drilling for oil climbed by 13 to 523 in the week ended Dec 23, marking the eighth straight week of growth and the most since December 2015.

"Given the uptrend in the rig count, supported by higher prices than a year ago, we wouldn't rule out a further upward revision in the Department of Energy forecast for December 2017 from this month's 9.0 million barrels a day rate," said Tim Evans, a Citi Futures analyst, in a note last week.

Nymex reformulated gasoline blendstock for January--the benchmark gasoline contract--fell 30 points to $1.6232 a gallon, while January diesel traded at $1.6632, 4 points higher.

ICE gasoil for January changed hands at $488.25 a metric ton, up $4.00 from Monday's settlement.

Write to Jenny W. Hsu at


Write to Jenny W. Hsu at

(END) Dow Jones Newswires

December 26, 2016 22:39 ET (03:39 GMT)

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