Oil prices ticked higher on Wednesday on expectations
that U.S. crude inventories have dropped and on signs that the world’s top oil
exporters will stick to agreed output cuts that took effect this week.
Global benchmark Brent crude futures LCOc1 rose 28 cents
to $55.75 a barrel, a 0.5 percent gain by 10:51 a.m. Eastern. U.S. West Texas
Intermediate crude futures CLc1 gained 25 cents, or 0.5 percent, at $52.58 a
barrel. Both benchmarks recovered some losses from the previous day – when the
U.S.-dollar .DXY hit a 14-year peak and knocked oil from 18-month highs – as
the greenback dipped on Wednesday, making dollar-denominated fuel purchases in
other currencies cheaper.
Weekly U.S. industry and government reports are expected to show a 1.7 million-barrel crude draw for last week, analysts polled by Reuters said ahead of the data due late Wednesday and on Thursday. “We are expecting a draw,” said Tariq Zahir, managing member of Tyche Capital Advisors in New York.
Oil companies likely drew down inventories in the final
week of the year for tax-related reasons, which could lead prices to spike
after inventory data is released. OPEC member Kuwait also lifted expectations
that producers will comply with a deal to reduce oversupply after its
state-owned oil producer said on Wednesday it would cut output in the first
quarter.
Members of the Organization
of the Petroleum Exporting Countries in November agreed their first output
cut since 2008 in an attempt to stabilize oil prices. As part of the deal,
Kuwait has to reduce output by 131,000 barrels per day. An OPEC committee
meeting to monitor compliance with the agreement is scheduled for Jan. 21-22 in
Vienna. “Prices are likely to remain volatile until there is evidence that
quotas are being adhered to,” analysts at Cenkos
Securities wrote.
Zahir cautioned that increased oil production from OPEC
member Libya has come online faster than anticipated and may deter some OPEC
members from cutting their own output.
Also reflecting a tightening market, traders expect top
oil exporter Saudi Arabia to raise the official selling price for its crude to
Asia in February. (Guardian)
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