By Dan Strumpf
Oil futures edged higher Wednesday, rebounding from a steep overnight loss, as investors continued to weigh the prospect of supply cuts in the coming months.
Light, sweet crude for February delivery gained 38 cents, or 0.7%, to $52.71 in the Globex electronic session of the New York Mercantile Exchange. February Brent crude gained 40 cents, or 0.7%, to $55.87 on the ICE Futures exchange.
Futures have veered between gains and losses in recent sessions as investors weigh the outlook that the oil market returns to balance this year, following a supply glut that has weighed down prices for more than two years. Most analysts are projecting a rebound in crude prices following November's production cut agreement by the Organization of the Petroleum Exporting Countries.
"Energy outperformed in 2016 and if OPEC delivers it will happen again in 2017," said analysts at Bernstein in a note to clients Wednesday. The bank said it expects Brent crude to average $60 a barrel in 2017. "Compliance with OPEC quotas will be the key area for investors to focus on in the first half of the year."
OPEC's agreed cut, which amounts to 1% of global production, is set to take effect this month. Prices rallied sharply on Tuesday after officials in Oman and Kuwait suggested they were in the process of enacting the cuts, bolstering confidence that the cartel would stick to its agreement.
Still, many traders are skeptical that all members of the cartel will abide by the letter of the deal. Skepticism has centered around Iraq, which is prosecuting a costly war against Islamic State, and Iran, which is trying to raise oil revenues after years of punishing sanctions.
Meanwhile, investors expect any sharp increase in oil prices to lead to a resumption in new drilling by U.S. oil producers, swamping the market once more.
Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--rose 122 points to $1.6340 a gallon, while February diesel traded at $1.6854, 87 points higher.
ICE gasoil for January changed hands at $492.00 a metric ton, down $1.75 from Tuesday's settlement.
Write to Dan Strumpf at firstname.lastname@example.org
(END) Dow Jones Newswires
January 03, 2017 23:37 ET (04:37 GMT)
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