Brent oil rose above $56 a barrel after OPEC members including Saudi Arabia said output cuts are bringing the market into balance, while the dollar weakened.
Futures added 1.1 percent in London after advancing 0.7 percent Monday. The level of compliance with the output-reduction deal and the outlook for rising global demand should balance the market in the first half, meaning the six-month accord probably won’t need to be extended, Saudi Arabia’s Energy Minister Khalid Al-Falih said. Bloated global oil inventories should start to decline, said United Arab Emirates Energy Minister Suhail Al Mazrouei. The dollar weakened after President-elect Donald Trump said the U.S. currency is already “too strong.”
Brent has increased since the Organization of Petroleum Exporting Countries and 11 other nations agreed late last year to trim supply by about 1.8 million barrels a day. While Middle East producers have signaled they’re rapidly implementing the agreed cuts, the rally’s momentum has fizzled amid concern that higher prices would spur more supply elsewhere. The U.S. recently raised this year’s output estimate, although production in China is forecast to continue its decline.
“There are continued constructive comments from oil producers, and the dollar is down,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “What is interesting is the rather confident nature of the Saudi comments recently, to the point where they are questioning whether an extension of the agreed cuts is necessary.”
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Brent for March settlement traded at $56.48 a barrel, up 62 cents, on the London-based ICE Futures Europe exchange at 12:14 p.m. in London. The contract gained 41 cents to $55.86 a barrel on Monday. Prices have averaged about $55 since the start of December. The global benchmark crude traded at a premium of $2.63 to West Texas Intermediate.
WTI for February delivery rose 67 cents from Friday’s close to $53.04 a barrel on the New York Mercantile Exchange. Monday’s transactions will be booked with Tuesday’s because of the Martin Luther King Jr. holiday in the U.S.
Many countries are “going the extra mile” in making deeper production cuts than they pledged, and OPEC will stop intervening in the market once global crude inventories return to their five-year average, Al-Falih said on Monday. Demand will pick up in the summer and OPEC wants to make sure markets are well-supplied, he said.