Oil advances as Iraq signals compliance with output accord
NEW YORK (Bloomberg) -- Oil rose to the highest close in more than a week as Iraq signaled that it would adhere to the OPEC production targets.
Futures climbed 0.9% in New York. Iraq said most international oil companies working in the country, along with the semi-autonomous Kurdish region, have agreed to cut crude output to fulfill an OPEC accord that takes effect in January. Saudi Arabia, the world’s biggest oil exporter, said its budget deficit will fall next year. Prices fell 1.5% on Wednesday after a report showed U.S. crude supplies rose by 2.26 MMbbl last week.
Oil has traded near $50/bbl since the Organization of Petroleum Exporting Countries agreed last month to curb production for the first time in eight years. The deal was bolstered by a pledge from 11 non-OPEC nations including Russia and Mexico to also trim supply. In the U.S., crude inventories remain at the highest seasonal level since the EIA began compiling weekly data in 1982.
"The market shows signs of consolidating below the record highs," Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. "We will have to see signs that they are actually cutting back production before we rise to new highs."
West Texas Intermediate for February delivery climbed 46 cents to settle at $52.95/bbl on the New York Mercantile Exchange. Total volume traded was about 33% below the 100-day average.
U.S. Inventories
Brent for February settlement rose 59 cents, or 1.1%, to $55.05/bbl on the London-based ICE Futures Europe exchange, closing at a $2.10 premium to WTI.
Russia and other producing countries that agreed to cut output next year will stick to their commitments, the country’s Energy Minister Alexander Novak told state-run Rossiya 24 television. Novak sees “no grounds” to doubt the accord.
"There’s no catalyst to push us one way or the other right now," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "The release of the Saudi budget today shows their incentive to make a deal. This is important."
Saudi Arabia’s budget gave the first detailed look at its long-term plan to overhaul the economy and wean the kingdom off oil. The budget deficit for 2017 will decline to 198 billion riyals ($53 billion), or 7.7% of gross domestic product, the Finance Ministry said in a statement on its website on Thursday. That compares with 297 billion riyals, or 11.5% of GDP, this year and 362 billion riyals in 2015.
While nationwide crude stockpiles grew last week, inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, declined by 245,000 bbl, the EIA said Wednesday.
