By Jenny W. Hsu and Kevin Baxter
Crude oil futures were up Tuesday amid muted holiday trading as investors remain in a wait-and-see mode ahead of a landmark effort by oil producers to reduce global supply.
U.S. crude for February delivery gained 55 cents, or 1.04%, to $53.57 a barrel. Brent, the global benchmark, rose 50 cents, or 0.91%, to $55.66 a barrel.
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.
"The momentum is still higher," said Ric Navy, senior vice president for energy futures at RJ O'Brien Associates. "I don't think a lot of people want to stand in front of what's going on."
Oil prices have risen steadily throughout December and analysts believe they 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 said, saying an important indicator would be inventory levels in these countries.
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 weekof 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.
Meanwhile, Saudi Arabia, the world's largest oil exporter, has released its government budget for 2017 and is planning to spend over $237 billion. The Riyadh-based Jadwa Research said in a note Sunday that this equated to an average 2017 selling price for Saudi crude of $52 a barrel and an average 2017 price of $55 for Brent.
Gasoline futures gained 1.77 cents, or 1.09%, to $1.6439 a gallon. Diesel futures gained 2.93 cents, or 1.76%, to $1.6921 a gallon.
Alison Sider contributed to this article.
Write to Jenny W. Hsu at firstname.lastname@example.org and Kevin Baxter at Kevin.Baxter@wsj.com
(END) Dow Jones Newswires
December 27, 2016 11:00 ET (16:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.