NEW YORK (DTN) -- New York Mercantile Exchange oil futures maintained overnight gains into the start of regular trade Friday on growing expectation nonmembers of the Organization of Petroleum Exporting Countries would agree to cut their production at a meeting with OPEC on Saturday (12/10) in Vienna.
On Nov. 30, OPEC agreed to cut production 1.2 million bpd to 32.5 million bpd starting Jan. 1, 2017, with the expectation some non-OPEC producers would join the effort by cutting their own supply by a combined 600,000 bpd. Russia, who is not a member of OPEC, has already pledged to cut output by 300,000 bpd. Saturday's meeting is meant to turn that expectation into a detailed agreement to reduce production that would be binding.
In addition to Russia, Azerbaijan, Kazakhstan, Oman, Mexico, Russia, Sudan, South Sudan, Bahrain and Malaysia will attend the talks in Vienna.
Although Russia has indicated it would cut production 300,000 bpd, reports out midweek showed Russian oil output at its highest rate in nearly 30 years in November at 11.21 million bpd, diluting their pledge. If Moscow and other non-OPEC producers do not limit supply warned analysts, OPEC's agreement to cut 1.2 million bpd in production may not be sufficient to rebalance the market any time soon.
At 9:00 AM ET, NYMEX January WTI crude futures gained 48cts to $51.32 bbl, near a three-day high of $51.50, and ICE February Brent crude futures added 37cts to $54.09 bbl. NYMEX January ULSD futures edged up 0.72cts to $1.6331 gallon, and January RBOB futures rose 1.0cts to $1.5147 gallon.
Saudi Arabia has reportedly told customers it will reduce oil deliveries starting January to comply with the OPEC agreement, lending upside support for oil futures.
As part of the Nov. 30 agreement, Saudi Arabia pledged to cut output roughly 4.7%, with the kingdom reporting production in November of 10.532 million bpd.
At 1:00 PM ET, Baker Hughes Inc. is scheduled to release its drilling report showing the number of operating oil and gas rigs in the United States for the week-ended today. On Wednesday, the Energy Information Administration reported U.S. production at 8.697 million bpd, holding near a six-month high.
George Orwel can be reached at email@example.com
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.