Oil climbed to an 18-month high in New York as output cuts by Kuwait and Oman signaled OPEC and its partners are delivering on their agreement to stabilize the market.
Futures rose as much as 2.8 percent after adding 45 percent last year, the biggest annual gain since 2009. Officials from Oman and Kuwait told local media they’re cutting oil production in January, fulfilling pledges that they and 22 other producers made on Dec. 10. Prices also advanced as China’s manufacturing purchasing managers index stabilized near a post-2012 high, signaling demand may be supported in the world’s second-biggest oil user.
Oil climbed for the first time in three years in 2016 as the Organization of Petroleum Exporting Countries and 11 other nations agreed to cut output starting Jan. 1 in an effort to reduce bloated global inventories. Prices, which eased in late December, are surpassing the peaks reached just after the deal was finalized, as Kuwait and Oman give the first signs the curbs are being implemented.
“The new year sees the start of the output cuts that were agreed between OPEC and some non-OPEC producers,” said Hamza Khan, head of commodities strategy at ING Bank NV in Amsterdam.
West Texas Intermediate for February delivery gained as much as $1.52 to $55.24 a barrel on the New York Mercantile Exchange and was trading at about $55 a barrel at about 7:30 a.m. Central time. There was no trading Monday because of the New Year holiday. Total volume traded Tuesday was about 28 percent above the 100-day average.
Brent for March settlement climbed $1.38 to $58.20 on the London-based ICE Futures Europe exchange, trading at a $2.22 premium to WTI for the same month. The global benchmark contract rose 52 percent last year, the most since 2009.
OPEC member Kuwait has reduced output by 130,000 barrels a day to about 2.75 million a day, Al-Anba newspaper reported, citing Kuwait Oil Co. Chief Executive Officer Jamal Jaafer. Oman is cutting 45,000 barrels a day from 1.01 million, the Oil Ministry’s Director of Marketing Ali Al-Riyami said on Oman TV.
OPEC nations and non-members including Russia and Mexico have agreed to trim output by about 1.8 million barrels a day. Iraq will start implementing cuts by reducing heavy and medium grades, the nation’s Oil Minister Jabbar al-Luaibi told Kuwaiti daily al-Jarida.
“If we see ongoing evidence of the production cuts, it will have a positive impact on the market,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “A big factor to watch over the coming months will be the response of shale oil to the supply cuts.”
China’s manufacturing purchasing managers index edged down to 51.4 in December from 51.7 the prior month, while a gauge of factory input prices surged to a five-year high of 69.6. U.K. manufacturing grew at the fastest pace in 2 1/2 years in December, helped by the pound’s depreciation since the vote to leave the European Union.