Oil trades near 17-month high ahead of Opec supply cuts

London - Oil traded near the highest since July last year amid optimism Organisation of Petroleum Exporting Countries (Opec) and 11 other producing nations will cut output as promised, helping eliminate a global supply glut.

Futures rose as much as 0.7% in New York, advancing for an eighth day in the longest winning streak in almost seven years.

Crude inventories should return to equilibrium and prices stabilise as the agreed cuts go into effect, Venezuelan Oil Minister Eulogio Del Pino said on Tuesday on state television.

A monitoring committee consisting of some Opec nations and non-members will meet on January 13 to track compliance with promised supply reductions, according to Opec Secretary-General Mohammad Barkindo.

Oil has traded near or above $50 a barrel since the Opecagreed last month to curb production for the first time in eight years. The market is now shifting focus to the group’s compliance toward the targeted reductions.

Money managers have trimmed bets on falling West Texas Intermediate crude prices to the lowest level since August 2014 in anticipation of reduced supply.

"The market is moving higher in the belief that compliance will be seen," said Ole Hansen, head of commodity strategy at Saxo Bank. "We have now rallied about 20% since late November on the expectation that Opec and non-Opec will deliver the promised cuts.

Sooner or later the market will adopt a wait-and-see approach, but not before year-end with so many looking for a high closing price on their books."

WTI for February delivery gained 25 cents to $54.15 a barrel on the New York Mercantile Exchange at 11:23 in London. The contract added 88 cents to close at $53.90 on Tuesday, the highest since July 2, 2015.

Total volume traded was about 51% below the 100-day average. Prices are up about 46% this year.

Output compliance

Brent for February settlement rose 31 cents to $56.40 a barrel on the London-based ICE Futures Europe exchange. Prices on Tuesday climbed 93 cents to settle at $56.09. Futures have gained 51% this year. The global benchmark traded at a premium of $2.28 to WTI.

Brent prices should stabilise between $60 and $70 a barrel as inventories return to equilibrium, and Venezuela will cut 95 000 barrels a day of production starting January 1, according to Del Pino and the country’s oil ministry.

US crude inventories probably declined by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Thursday.

Crude supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, probably climbed by 500 000 barrels last week.

Oil-market news:

BP Plc will pay A$1.785bn ($1.3bn) for Woolworths’s network of Australian gas stations in a deal that will cement the London-based oil company as one of the nation’s biggest fuel providers.

Tanker Valtamed is set to arrive on Wednesday to load 630 000 barrels of crude at Libya’s Hariga Port, according to Adnan Omran, general manager of Al Omran International Maritime Agencies.

China will raise gasoline price by 100 yuan/ton and diesel by 95 yuan/ton, according to a statement on National Development and Reform Commission website.