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London - Oil jumped as the International Energy Agency (IEA) said the Organisation of Petroleum Exporting Countries (OPEC) had achieved record initial compliance of 90 percent with their cuts agreement, while demand grew faster than expected.
Futures gained as much as 1.7% in New York to a four-day high. In the first month of the Organisation of Petroleum Exporting Countries’ agreement, key member Saudi Arabia reduced production by even more than it had committed, while higher demand is aiding the group’s bid to re-balance world markets, the IEA said.
Oil has fluctuated above $50 a barrel since a deal to trim output between OPEC and 11 other nations took effect on January 1. US producers are taking advantage of higher prices by increasing drilling activity and boosting daily output to the highest level since April, a dynamic the IEA said is capping prices in the mid-$50s.
“The key question for the oil market is how long OPEC can sustain this deal,” Spencer Welch, a director at IHS Energy, said by e-mail. “Historic analysis of similar production limits suggests that 100% compliance is unlikely.”
West Texas Intermediate for March delivery was at $53.79 a barrel on the New York Mercantile Exchange, up 79 cents, at 1:26 p.m. in London. Total volume traded was about 7% above the 100-day average. The contract gained 66c to $53 on Thursday. Prices are little changed this week.
Record compliance
Brent for April settlement was 97c higher at $56.60 a barrel on the London-based ICE Futures Europe exchange. The contract gained 51c to $55.63 on Thursday. Prices are down 0.4% this week. The global benchmark crude traded at a premium of $2.34 to WTI.
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The IEA increased its estimates of 2016 world oil demand growth for a third month, and boosted its outlook for 2017, anticipating an increase of 1.4 million barrels a day this year.World oil inventories will fall by 600 000 barrels a day during the first half of the year if OPEC sticks to its agreement, the IEA said.
OPEC is being joined by 11 non-members including Russia and Kazakhstan, who implemented about half of their pledged cut of 558 000 barrels a day last month, preliminary data from the agency shows.
OPEC’s own data, derived from six external sources including the IEA, showed a compliance rate of 92%, according to a person familiar with the matter. The organisation will publish the statistics in its monthly report on Febuary 13.
Oil-market news:
China’s crude imports in January slipped from a record as refiners eased buying before the Lunar New Year break, when industrial activity tends to slow during the country’s most-important holiday.
Saudi Arabian Oil will sell full volumes of contractual supply for March to Asian refiners, according to people with knowledge of the matter who asked not to be identified because the information is private. Occidental Petroleum may double its US Permian Basin oil production in the next four years after record-low costs to find and pump crude helped make it the company’s main profit driver.
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