Jan 13, 2017 09:25 AM IST IST | Source: Reuters

Oil rates edge up on record China crude imports,Saudi output cut

Brent crude futures, the international benchmark for oil prices, were trading at USD 56.07 per barrel at 0249 GMT, up 6 cents from their last close.

Oil prices edged up on Friday, supported by reports on details of OPEC output cuts, although lingering doubts over producer compliance with supply reduction targets weighed on the market.

Brent crude futures, the international benchmark for oil prices, were trading at USD 56.07 per barrel at 0249 GMT, up 6 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at USD 53.09 per barrel, up 8 cents.

Record Chinese imports of oil at 8.56 million barrels per day (bpd) in December supported prices, with those imports expected to continue rising in 2017, traders said.

Traders said that prices were also supported by comments from top crude exporter Saudi Arabia that its output had fallen below 10 million bpd, levels last seen in early 2015. That would also mean that the kingdom has cut production by more than the 486,000 bpd it agreed to under a global deal to stem a fall in oil prices.

However, hard evidence of supply reductions to customers has yet to emerge two weeks into January, when the cuts by the Organization of Petroleum Exporting Countries (OPEC) and other producers like Russia were supposed to start.

"The direction of prices will depend greatly on producer compliance with pledged supply cuts made in 2016," said French bank BNP Paribas.

"The market has rallied since the end of 2016, more on faith than fact, following OPEC and selected non-OPEC countries announcing output cuts for the first six months of 2017. Any slip in the market's confidence that producers will follow through on their promises may lead to a sharp price corrections," it added.

BNP said that it expects WTI prices to average USD 56 per barrel in 2017, up USD 7 from its previous forecast, and Brent to average USD 58 per barrel, up USD 8 from its earlier estimate.

The U.S. Energy Information Administration said in its January outlook that it forecasts Brent and WTI to average USD 53 per barrel and USD 52 per barrel, respectively, in 2017.

Dutch bank ABN Amro said that "conflicting signals" would likely keep oil prices trading in narrow ranges during the first half of the year.

The recent agreement between members of OPEC and non-OPEC producers to cut output had left many in doubt over their resolve, the bank said.

"This means that the oil price could advance further if the targeted cuts are actually achieved," ABN Amro said, but added that rising U.S. shale output and rising supply from OPEC members Nigeria and Libya, which were exempt from the pact, might offset any reductions.

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