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Oil dips on doubts over touted production cuts
[SINGAPORE] Oil prices dipped on Thursday, hit by doubts that producers would fully deliver on promises to cut output, although record US automobile sales and falling crude stocks offered markets some support.
Brent crude futures, the international benchmark for oil prices, were trading at US$56.29 per barrel by 0559 GMT, down 17 cents from their last close.
Traders said the decline came on the back of worries whether plans by the Organization of the Petroleum Exporting Countries (Opec) and other leading producers to cut crude supply would be fully implemented.
"There remains a question mark over whether Opec, with a long history of non-compliance, will actually follow through (with the cuts). Very few respondents expect full compliance," Singapore Exchange (SGX) said on Thursday, citing results from a survey of its participants.
"Three-quarters of those surveyed went for (crude) prices averaging within the current US$50-60/barrel range (for 2017)," SGX added.
In a note to clients on Wednesday Goldman Sachs said "the oil market outlook in early 2017 will be driven largely by the Opec and non-Opec cuts" and it expected "Brent prices to peak at US$59 per barrel" by mid-2017.
However, technical price trend indicators show Brent may soon test support at US$55.43 a barrel, said Reuters commodity analyst Wang Tao, though he added that the longer-term upward trend in crude prices that started in the second half of last year was still in place.
In the United States, crude prices were firmer than on international markets, supported by strong vehicle sales and a report of falling commercial crude stockpiles.
US West Texas Intermediate (WTI) crude oil futures were trading down 9 US cents, at US$53.17 per barrel.
Firmer prices for WTI than for Brent were supported by an American Petroleum Institute (API) report showing US crude inventories fell 7.4 million barrels in the week ended Dec 30 to stand at 482.7 million, outstripping analyst expectations for a decrease of 2.2 million.
"API Inventories show a more than expected drawdown in crude oil inventories for this week," said Jonathan Chan, oil analyst at Singapore-based brokerage Phillip Futures. "It is highly expected that tonight's Energy Information Administration (EIA) inventory numbers should also show a similarly large drawdown in crude oil inventories."
WTI was also buoyed by US car and truck sales, which were up 3.1 per cent in December on the year, and hit a record 17.55 million overall in 2016.