By Dan Strumpf

Oil futures began the year with modest gains in Asia trading, as oil traders kept their focus on the Organization of the Petroleum Exporting Countries and the prospect of declining global stockpiles.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $54.00 a barrel, up 28 cents, or 0.5%, in the Globex electronic session. March Brent crude on London's ICE Futures exchange rose 27 cents, or 0.5%, to $57.09 a barrel.

Oil prices last year posted their biggest gains since the financial crisis-era rebound in 2009, a recovery fueled by a draw-down in global stockpiles and a resurgence in OPEC's willingness to control prices. Traders and analysts are likely to keep their attention on OPEC'snext moves, as well as on the actions of individual members and their willingness to follow through on the proposed cuts.

The cartel agreed to cuts that amount to 1% of global production at a meeting in November. Those cuts take effect this month, and group members have a history of reneging on output agreements.

"It's going to be a year in which price action is driven by OPEC and these cuts," said Virendra Chauhan, oil analyst at Energy Aspects in Singapore. "It's going to be very much a case of the extent that these guys are complying with the production cuts set at the end of November."

Another factor likely to dominate trading in 2017 will be how U.S. oil producers respond to the cuts. Already, U.S. shale producers have responded to last year's price rebound by bringing new output online, and any steep increase in prices is likely to spur more drilling. The pace of Indian and Chinese demand growth will also likely be in focus.

"The global economy is on tentative hooks, so you're really going to slow down demand growth" if oil prices increase too sharply, Mr. Chauhan said. "For Riyadh, $100 oil is just as scary as $30 oil."

Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--rose 67 points to $1.6776 a gallon. ICE gasoil for January changed hands at $504.50 a metric ton, up $3.50 from Monday's settlement.

Write to Dan Strumpf at

(END) Dow Jones Newswires

January 02, 2017 23:07 ET (04:07 GMT)

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