By January 6, 2017 Read More →

Oil prices edge up, but strong dollar, OPEC cut doubts weigh

Oil prices

While oil prices are rising thanks to the OPEC supply pact, analysts are concerned “the deal inadvertently tightens the medium and heavy balances incrementally more than the light, sweet market.” Encana photo.

Brent crude oil prices top $57/barrel

By Devika Krishna Kumar

NEW YORK, Jan 6 (Reuters) – Oil rose slightly on Friday as investors bought futures ahead of the weekend, but a strong U.S. dollar limited gains, as did lingering doubts about whether all OPEC producers would cut output in line with an agreement.

Trading was choppy, and market players cited end-of-week position-squaring and relatively low volumes during the first trading week of the year.

Brent crude futures were trading 15 cents higher at $57.04 per barrel at 1:15 p.m. EST (1815 GMT), after moving in a $56.28-to-$57.47 range.

U.S. West Texas Intermediate (WTI) crude futures were up 26 cents at $54.02 a barrel, after trading between $53.32 and $54.32.

The contracts were on track for a slight gain on the week.

“There’s a lot of volatility, or at least changes in direction,” ABN Amro senior energy economist Hans van Cleef said. “People think the long-term trend is up, but after a gain of a few dollars, they take profit.”

The dollar gained broadly after the U.S. non-farm payrolls report showed slower hiring in December but an increase in wages, feeding expectations of further interest rate increases from the Federal Reserve this year.

A stronger greenback makes oil more expensive for holders of other currencies.

Top crude exporter Saudi Arabia and fellow Gulf members Abu Dhabi and Kuwait showed signs they were cutting production in line with an agreement by OPEC and other producers, yet market watchers have doubts about overall compliance.

“Market balances are unquestionably tightening, but concerns pertaining to the pace at which the global storage glut will be drawn down toward historically normal levels will be the focal point for the year ahead,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

“While the market has centered its attention on the notional size of the announced cuts from both OPEC and Non-OPEC countries and whether or not the group will deliver on its promises, we believe that an important factor is being overlooked … the deal inadvertently tightens the medium and heavy balances incrementally more than the light, sweet market.”

U.S. energy companies this week added oil rigs for a 10th week in a row, bringing the total count up to 529, the most since December 2015, energy services firm Baker Hughes Inc said on Friday.

(Additional reporting by Libby George in London, Henning Gloystein in SINGAPORE and Osamu Tsukimori in TOKYO; Editing by Marguerita Choy and Susan Thomas)


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