By Jenny W. Hsu
Crude futures clawed back some gains in Asia trade Friday on hopes the continuing output cuts by major producers is chipping away at global oversupply.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at $53.73 a barrel at 0330 GMT, up $0.19 in the Globex electronic session. April Brent crude on London's ICE Futures exchange rose $0.17 to $56.73 a barrel.
Data from the Russian Energy Ministry Thursday showed the country's production of oil and condensate dropped by around 100,000 barrels a day in January from the previous mouth, giving oil players reason to believe that oil-producing nations, including those from the Organization of the Petroleum Exporting Countries, are adhering to a dealthat calls for a collective reduction in output of 1.8 million barrels a day, or roughly 2% of the world's daily production.
"There is anecdotal evidence to suggest that the collective agreed cuts are progressing according to schedule," said analysts at National Australia Bank, noting that oil prices have risen around 15% above pre-deal levels. Data on OPEC's January production will be released in mid-February.
OPEC is scheduled to meet in June to review the effectiveness of the pact and the cartel could suggest extending the deal for more months.
A fully implemented deal could swing the oil market to a 900,000-barrel a day deficit by the third quarter, said Citi Futures analyst Tim Evans. "But, of course, that assumes the production limits are extended beyond the initial six-month period, which can't be taken for granted," he said.
Offsetting positive sentiment are production gains in the U.S., where inventories of crude and gasoline grew much more than anticipated last week. Analysts say the uptrend will likely remain in tandem with the rising prices. Increased supplies coming from the U.S. run the risk of undercutting OPEC's effort to dry out the market. Moreover, non-U.S. oil nations may be enticed to crank up their operations in defense of their market share.
According to the Energy Information Administration's latest forecast, U.S. crude-oil production will expand from an average of 8.9 million barrels a day in 2016 to 9.3 million barrels a day in 2018, "primarily as a result of gains in the major U.S. tight-oil producing states."
Oil players are also watching U.S. President Donald Trump's energy policies as well as his attitude toward Iran. Earlier this week, the administration publicly condemned Tehran for conducting a ballistic missile test, fueling speculation that the U.S. may toughen its stance and reinstate sanctions, including oil trading, against Iran."For now, most people are expecting the tension between U.S. and Iran to be mainly verbal but it is hard to predict what Mr. Trump would do next. His main interest is to enlarge U.S. market shares," said a Singapore-based fuel trader for a Chinese private refinery.
Another area of concerns is President Trump's eagerness to revamp the 23-year old North America Free Trade Agreement.
"The oil markets will be keeping a close eye on Trump as news overnight that he has serious concerns regarding the Nafta could have implications for imports from Canada and Mexico to the U.S.," said Stuart Ive, a client manager at OM Financial.
Nymex reformulated gasoline blendstock for March-the benchmark gasoline contract-rose 38 points to $1.5367 a gallon, while March diesel traded at $1.6570, 52 points higher.
ICE gasoil for February changed hands at $497.75 a metric ton, down $3.00 from Thursday's settlement.
Write to Jenny W. Hsu at email@example.com.
(END) Dow Jones Newswires
February 02, 2017 23:17 ET (04:17 GMT)
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