CRANBURY, N.J. (DTN) -- Nearest delivered oil futures traded on the New York Mercantile Exchange rallied ahead of the weekend as market sentiment improved that agreed to production cuts from major oil producing countries would occur while the U.S. dollar pulled back from Thursday's 14-year high.
Early week enthusiasm for a tighter global oil market in 2017 frayed as the week wore on, as doubt by traders that production cuts agreed to by the Organization of the Petroleum Exporting Countries and several non-OPEC countries would come to fruition amid a history of noncompliance.
Comments from Russia's Energy Minister Alexander Novak shored up support Friday, after the Russian official said all of Russia's companies would adhere to an agreement by Russia to cut production 300,000 bpd.
On Dec. 10, 11 non-OPEC oil producing nations agreed to cut their output by 558,000 bpd, with Russia, the world's largest producer, shouldering more than half of the total. The pact followed a Nov. 30 agreement by OPEC to reduce their output by 1.2 million bpd, with the six-month agreements to begin Jan. 1.
Oil futures rallied Monday in reaction to the non-OPEC agreement, with West Texas Intermediate, Brent crude and ULSD futures all rallying to 17-month highs on their respective spot continuous charts, and the RBOB contract to a six-week high. However, the bullish sentiment turned to caution as analysts note the checkered history of OPEC in adhering to their quotas, while Russia in the past has walked away from a pledge to cut production in concert with OPEC.
Today's gains lifted the WTI and Brent contracts to modest weekly advances, with January WTI settling up $1.00 at $51.90 bbl, and 40cts higher from prior Friday. On Monday (12/12), the NYMEX WTI contract rallied to a $54.51 bbl 17-month high on the spot continuous chart.
The February Brent crude futures contract, which trades on the IntercontinentalExchange, settled $1.19 higher on the session and 88cts on the week to a $55.21 bbl, while trading at a $57.89 bbl multi-month spot high on Monday.
NYMEX January ULSD futures rallied 3.03cts Friday to a $1.6723 gallon settlement, holding below Monday's $1.7106 17-month high on the spot continuous chart, while gaining 3.49cts from prior Friday. January RBOB futures headed into the weekend with a $1.5571 gallon settlement for a 1.5cts gain on the session while rallying 4.98cts on the week. On Monday, the spot-month contract traded at a $1.5910 gallon six-week high, holding below the Nov. 1 $1.6351 gallon spike high, with the previous high reached in May.
Brian Milne can be reached at firstname.lastname@example.org
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