Oil edged further above $55 a barrel yesterday, drawing support from expectations of tighter supply once the first output cut deal between OPEC and non-OPEC producers in 15 years takes effect on Sunday.
January 1 is the official start of the deal agreed by the Organization of Petroleum Exporting Countries and several non-OPEC producers to lower production by almost 1.8 million barrels per day (bpd).
Brent crude LCOc1 was up 54 cents at $55.70 a barrel at 1501 GMT (10:01 a.m. ET). The global benchmark reached $57.89 on Dec. 12, the highest since July 2015. U.S. crude CLc1 gained 63 cents to $53.65.
The members of an OPEC and non-OPEC committee formed to monitor the market may meet on January 13, two sources said. Oil rallied further after news of the meeting, which may give an early indication of compliance with the deal.
“From January, we’ll start to have a better idea about the level of OPEC production. That is going to be more and more of a focus,” said Olivier Jakob, oil analyst at Petromatrix, who added that prices will struggle to rally much further.
“To go above $60 is going to be difficult. We’re already close to the top rather than the bottom of the range right now, he said.”
There was no trading on Monday after the Christmas holiday, and volume was light yesterday. Russian oil producer Gazprom Neft said yesterday it planned to increase oil production by 4.5-5 per cent next year, less than it had intended before Russia joined the supply cut deal.
Major OPEC members such as Saudi Arabia and Iraq have informed customers of lower supplies. But Libya and Nigeria – which are exempted from reductions because of conflict have curbed their output – have been increasing production.
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