Oil prices inched up on Friday, supported by reports on details of OPEC output cuts, although lingering doubts over producer compliance with supply reduction targets weighed on the market.
Brent crude futures LCOc1, the international benchmark for oil prices, were trading at $56.04 per barrel at 0632 GMT (1.32 a.m. ET), up 3 cents from their last close.
U.S. West Texas Intermediate (WTI) CLc1 crude futures were also up 3 cents at $53.04 per barrel.
Record Chinese crude imports of 8.56 million barrels per day (bpd) in December helped buoy prices, traders said, with shipments expected to continue rising in 2017.
However, exports of Chinese refined oil products last month rose nearly 25 percent on a year earlier to a record 5.35 million tonnes, well above November’s previous record of 4.85 million tonnes, in a sign that refiners are producing too much for even fuel-thirsty China to absorb.
On the supply side, markets were bolstered by comments from top crude exporter Saudi Arabia which said that its output had fallen below 10 million bpd, to levels last seen in early 2015.
That would mean that the kingdom has cut production by more than the 486,000 bpd it agreed to under a deal to stem a fall in oil prices.
However, hard evidence of export reductions has yet to emerge two weeks into January, when the cuts by the Organization of Petroleum Exporting Countries (OPEC) and other producers like Russia were supposed to start.
“The direction of prices will depend greatly on producer compliance with pledged supply cuts made in 2016,” said French bank BNP Paribas.
“Any slip in the market’s confidence that producers will follow through on their promises may lead to sharp price corrections,” it added.
BNP said that it expected WTI prices to average $56 per barrel in 2017, up $7 from its previous forecast, and Brent to average $58 per barrel, up $8 from its earlier estimate.
The U.S. Energy Information Administration said in its January outlook that it forecasts Brent and WTI to average $53 per barrel and $52 per barrel respectively in 2017.
Even if OPEC cuts its output as agreed, traders said that rising U.S. shale output and increasing supply from OPEC members Nigeria and Libya, which were exempt from the pact, might offset any reductions.
An informal Reuters survey of over 1,000 energy market professionals showed that Brent prices in 2017 are expected to average around $55-$60 a barrel.
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