Oil prices rise on Opec production cuts and China forecast
Countries had agreed cuts in order to reduce the global supply glut depressing prices
Iraq, which many analysts expected not to reduce supply, said on Thursday it had cut production by 160,000 barrels per day since the beginning of January. Photograph: iStock
Oil prices rose on Thursday, supported by signs that Opec is starting to cut output and expectations of strong demand growth in China. But rising US crude inventories reinforced concerns over plentiful global supplies.
Benchmark Brent crude oil was up 50 cents to $55.60 a barrel by 0845 GMT. US crude was up 35 cents a barrel to $52.60.
In November, the Organization of the Petroleum Exporting Countries agreed to cut oil production in order to reduce a global supply glut that has depressed prices for more than two years. Several Opec members appear to be implementing the deal.
“Reports are emerging that Opec signatories to the production cut agreement have already commenced reducing output,” said Daniel Hynes, a commodities analyst at ANZ Research.
Opec member, Iraq, which many analysts expected not to reduce supply, said on Thursday it had cut production by 160,000 barrels per day since the beginning of January. By the end of the month, output would be cut by 210,000 bpd, it said.
Dominant Opec member Saudi Arabia has earmarked some supply reductions for February to China, India and Malaysia, and is focusing most of its cuts on Europe and the US.
BMI Research said overall “compliance to the Opec/non-Opec oil production cut appears to be positive”. It calculates “compliance with production cuts at around 73 per cent”, led by high compliance from members of the Gulf Cooperation Council: Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.
Prices were also lifted by news of record Chinese car sales, which grew by 13.7 per cent from 2015-2016, to 28 million sold vehicles.
Reflecting China’s growing fuel consumption, its net crude imports will rise 5.3 per cent to 396 million tonnes (about 8 million bpd) in 2017, state-owned China National Petroleum Corp (CNPC) said on Thursday. Its crude demand will hit a record 594 million tonnes this year (about 12 million bpd), CNPC said.
In the US, traders said an inventory report published by the US Energy Information Administration on Wednesday implied ongoing oversupply as crude stocks unexpectedly rose by 4.1 million barrels, to 483.11 million barrels.