NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures advanced at the start of regular trade Friday as the dollar edged off a 14-year high, and major oil producers said they plan to comply with recent agreements to reduce their oil production.
The latest comment came from Russian Energy Minister Alexander Novak who said today that all Russian oil companies including state-controlled Rosneft have agreed to cut crude oil output in the wake of the agreement Russia signed with the Organization of Petroleum Exporting Countries.
Russia was one of the 11 non-OPEC producers who, after a meeting with OPEC in Vienna on Dec. 10, agreed to cut their production voluntarily or through managed decline by 558,000 bpd for six months starting on Jan. 1, 2017, which could be extended for another six months depending on market conditions. Of that total output cut, Russia would contribute 300,000 bpd, with Mexico responsible for 80,000 bpd.
OPEC had also agreed on Nov. 30 to cut their output by 1.2 million bpd to 32.5 million bpd. Together, those deals boosted expectations that a two-year supply overhang would clear soon and boost oil prices. The prospect of lower supply has prompted Goldman Sachs to boost its price forecast for West Texas Intermediate to $57.50 bbl from $55 bbl for the second quarter 2017. For Brent crude oil, Goldman expects prices to range from $55 to $60 bbl.
The latest comment by Novak vowing compliance with the deal to trim supply follows similar ones from key OPEC producers including Kuwait and Saudi Arabia who have notified customers that they will cut beginning in January.
However, other analysts are taking a wait-and-see attitude, warning that compliance with the agreed cuts still could be an issue down the road since OPEC members have a long record of cheating on their agreed output quotas, and 15 years ago Russia broke its promise to join OPEC in cutting its output, sending oil prices tumbling.
Meanwhile, the greenback is consolidating within Thursday (12/15) wide trade range that included an increase to the highest level since Dec. 2, 2002, following the Federal Reserve's move to hike its overnight lending rate by 25 basis points on Wednesday. The central bank also hinted that the pace of rate hikes could quicken next year.
At last glance, NYMEX January WTI futures were up 43cts at $51.33 bbl while ICE February Brent crude futures gained 65cts $53.15 bbl. In products trade, ULSD futures moved up 1.91cts to $1.6611 gallon and January RBOB futures climbed 1.55cts to $1.5576 gallon.
The market will scrutinize Baker Hughes Inc.'s weekly oil rig count data due out early afternoon. Also, the East Coast has been hit by a severe Arctic cold blast that is expected to boost heating oil consumption in the region.
George Orwel can be reached at email@example.com
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