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Oil steady as Saudi Arabia says has cut output, but oversupply worries linger

Published 13/01/2017, 12:09 pm
© Reuters.  Oil steady as Saudi Arabia says has cut output, but oversupply worries linger
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* Saudi Arabia says its production has fallen below 10 million bpd

* But doubts linger over extent of broad producer cuts

* Rising U.S. shale output to counter planned OPEC curbs

By Henning Gloystein

SINGAPORE, Jan 13 (Reuters) - Oil prices were steady 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.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $53.01 per barrel at 0052 GMT, unchanged from their last settlement.

Brent crude futures, the international benchmark for oil prices, were yet to trade.

Traders said that prices received some support from statements from top crude exporter Saudi Arabia that its output had fallen below 10 million barrels per day (bpd), a level last seen in February 2015. would also mean that the kingdom has cut production more than the 486,000 bpd it agreed to late last year under a global deal to curb production and stem a fall in oil prices.

However, hard evidence of deep supply reductions to customers has yet to emerge two weeks into January, when the planned cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia are supposed to take effect. direction of prices will depend greatly on producer compliance with pledged supply cuts made in 2016," said French bank BNP Paribas (PA:BNPP).

"The market has rallied since the end of 2016, more on faith than fact, following OPEC and selected non-OPEC countries announcing output cuts for the first 6 months of 2017. Any slip in the market's confidence that producers will follow through on their promises may lead to a sharp price corrections," it added.

The bank said that it expects WTI prices averaging $56 per barrel in 2017, up $7 from its previous forecast, and Brent to average $58 per barrel, up $8 a barrel from its earlier estimate.

Dutch bank ABN Amro said in its January outlook that "conflicting signals" would likely keep oil prices trading in narrow ranges during the first half of the year.

"For one thing, the recent agreement reached by the OPEC members as well as several non-OPEC oil producers to cut output has ... not everyone convinced of the resolve of these producers," it said.

"This means that the oil price could advance further if the targeted cuts are actually achieved," ABN Amro said, but added that rising output from U.S. shale producers as well as OPEC members Nigeria and Libya, which were exempt from the cuts, might offset any supply reductions.

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