Hong Kong - Oil advanced after the biggest annual gain
since 2009 as output cuts by Kuwait signalled OPEC's position and other producing nations
started trimming production to stabilise the market.
Futures rose as much as 0.9 percent in New York after
increasing 45 percent last year. OPEC member Kuwait has cut output by 130 000
barrels a day to about 2.75 million a day, Al-Anba newspaper reported, citing
Kuwait Oil Company CEO Jamal Jaafer. Drillers targeting crude in the US added
active rigs for a ninth week, boosting the number to the highest in about a
year, according to data from Baker Hughes on Friday.
Oil climbed for the first time in three years in 2016 as
the Organisation of Petroleum Exporting Countries and 11 nations from outside
the group agreed on an output cut plan, effective January 1, to reduce bloated
global inventories. In the US, the world’s biggest consumer, crude stockpiles
remain at the highest seasonal level in more than three decades.
“It’s understood that countries like Kuwait, who are
close to Saudi Arabia, are expected to diligently implement the output cuts,
but it’s those nations such as Iraq and Russia that are the ones the market is
mostly concerned about,” said Hong Sung Ki, a Seoul-based commodities analyst
at Samsung Futures Inc. “Once oil reaches $60 a barrel, increasing rigs in the
US will be the biggest factor that will limit oil from rising further.”
West Texas Intermediate for February delivery gained as
much as 48 cents to $54.20 a barrel on the New York Mercantile Exchange and was
at $54.03 at 2:40 p.m. in Singapore. There was no trading Monday because of the
New Year holiday. Total volume traded was about 42 percent below the 100-day
average.
Output cuts
Brent for March settlement was 32 cents higher at $57.14
on the London-based ICE Futures Europe exchange. Prices climbed 52 percent last
year, the most since 2009. The global benchmark traded at a premium of $2.18 to
March WTI.
OPEC nations and non-members including Russia and Mexico
have agreed to trim output by about 1.8 million barrels a day. Iraq will start
implementing cuts by reducing heavy and medium grades, the nation’s oil
minister Jabbar al-Luaibi told Kuwaiti daily al-Jarida.
“If we see ongoing evidence of the production cuts, it
will have a positive impact on the market,” said Ric Spooner, a chief market
analyst at CMC Markets in Sydney. “A big factor to watch over the coming months
will be the response of shale oil to the supply cuts.”
BLOOMBERG