Crude Oil Hits $56 as Russia Joins OPEC Cuts
2 Feb 2017
Crude oil price yesterday rose to around $56 per barrel, supported by signs that Russia and the Organisation of the Petroleum Exporting Countries (OPEC) are delivering on promised supply reductions, although a report showing a large rise in United States crude inventories curbed the price gains.
Russia has cut production in January by around 100,000 barrels per day (bpd), according to data provided to Reuters yesterday.
A day earlier, a Reuters survey found high compliance by OPEC with agreed cuts.
International benchmark, Brent crude was up 50 cents at $56.08 a barrel, having risen as high as $56.24, while US crude rose 41 cents to $53.22.
However, the producer efforts were countered by signs of a persistent supply glut in the United States. US crude inventories rose by 5.8 million barrels, industry group the American Petroleum Institute said on Tuesday, more than analysts forecast. Following from last Tuesday’s API report the US government’s official inventory figures are due later on Wednesday. Analysts expect crude stocks to rise by 3.3 million barrels.
The cuts by Russia and the OPEC follow last year’s agreement to lower supplies by a combined 1.8 million bpd, to prop up prices which are still half their level of mid-2014. A Russian cut of 100,000 bpd would be a third of Moscow’s pledge to reduce its output by 300,000 bpd. However, Russia has said that its planned output reduction would be gradual.
OPEC has implemented most of its reduction. A Reuters survey last Tuesday found that OPEC members in January have delivered on about 82 percent of their deal to lower supply by 1.16 million
OPEC had achieved 82 per cent on compliance with the output cuts as the group’s oil output was set to fall by more than 1 million barrels per day (bpd) in January, according to Reuters survey.
OPEC had agreed to cut its output by about 1.2 million bpd from January 1 to prop up oil prices and reduce a supply glut.
Supply from the 11 OPEC members with production targets under the deal has averaged 30.01 million bpd, according to the survey based on shipping data and information from industry sources, down from 31.17 million bpd in December.
Compared with the levels that the countries agreed to make the reductions from – in most cases their October output – OPEC members have cut production by 958,000 bpd of the pledged 1.164 million bpd, equating to 82 percent compliance.
Compliance of 80 per cent comfortably exceeds the initial 60 per cent achieved when the previous cuts deal was implemented in 2009.