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[LONDON] Oil traded near the highest since July last year amid optimism Opec and 11 other producing nations will cut output as promised, helping eliminate a global supply glut.
Futures rose as much as 0.7 per cent in New York, advancing for an eighth day in the longest winning streak in almost seven years. Crude inventories should return to equilibrium and prices stabilise as the agreed cuts go into effect, Venezuelan Oil Minister Eulogio Del Pino said Tuesday on state television.
A monitoring committee consisting of some Opec nations and non-members will meet on Jan 13 to track compliance with promised supply reductions, according to Opec Secretary-General Mohammad Barkindo.
Oil has traded near or above US$50 a barrel since the Organization of Petroleum Exporting Countries agreed last month to curb production for the first time in eight years.
The market is now shifting focus to the group's compliance toward the targeted reductions. Money managers have trimmed bets on falling West Texas Intermediate crude prices to the lowest level since August 2014 in anticipation of reduced supply.
"The market is moving higher in the belief that compliance will be seen," said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
"We have now rallied about 20 per cent since late November on the expectation that Opec and non-Opec will deliver the promised cuts. Sooner or later the market will adopt a wait-and-see approach, but not before year-end with so many looking for a high closing price on their books."
WTI for February delivery gained 25 US cents to US$54.15 a barrel on the New York Mercantile Exchange at 11.23am in London. The contract added 88 US cents to close at US$53.90 on Tuesday, the highest since July 2, 2015.
Total volume traded was about 51 per cent below the 100-day average. Prices are up about 46 per cent this year.
Brent for February settlement rose 31 US cents to US$56.40 a barrel on the London-based ICE Futures Europe exchange. Prices on Tuesday climbed 93 US cents to settle at US$56.09. Futures have gained 51 per cent this year. The global benchmark traded at a premium of US$2.28 to WTI.
Brent prices should stabilise between US$60 and US$70 a barrel as inventories return to equilibrium, and Venezuela will cut 95,000 barrels a day of production starting Jan 1, according to Del Pino and the country's oil ministry.
US crude inventories probably declined by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Thursday. Crude supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, probably climbed by 500,000 barrels last week.