Oil holds near annual peaks, awaiting Opec cuts, supply data

[NEW YORK] Crude oil prices edged up for a fourth consecutive session on Wednesday, close to their highest levels since mid-2015, ahead of US oil inventory figures and as the market awaits evidence of Opec supply reductions in the new year.

US benchmark West Texas Intermediate (WTI) crude oil futures settled 16 US cents higher at US$54.06 a barrel, not far from the year's high of US$54.51 reached on Dec 12.

Brent crude futures ended up 13 US cents at US$56.22 a barrel. The international benchmark hit US$57.89 on Dec 12, its highest since July 2015.

Oil prices have gained 25 per cent since mid-November, helped by expectations for Opec's supply cut and solid US economic figures that have also bolstered equity prices.

Trading was thin, with just 294,000 front-month futures contracts changing hands, compared with a daily average of 525,000 over the last 200 days. It is expected to remain quiet for the balance of the week.

Analysts polled ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the US Department of Energy's Energy Information Administration (EIA) forecast, on average, that crude stocks declined 2.1 million barrels in the week to Dec 23.

The API data will be released on Wednesday at 4:30pm EST (2130 GMT), while the EIA report has been rescheduled to Thursday at 11am EST (1600 GMT), following the federal holiday on Monday because of the Christmas holiday.

The market is taking a wait-and-see approach to the official start of the landmark deal reached by the Organization of the Petroleum Exporting Countries (Opec) and several non-Opec members to reduce their output. The deal is set to kick in from Jan 1.

Opec and non-Opec producers are expected to lower production by almost 1.8 million barrels per day (bpd), with Saudi Arabia, Opec's largest producer, agreeing to bear the lion's share of the cuts.

Iraqi Oil Minister Jabar Ali al-Luaibi said on Wednesday his country, which has seen fast production growth in the past two years, would cut supply by 200,000-210,000 bpd from January.

Mr Luaibi said on a visit to fellow Opec member Kuwait that he saw oil prices rising to US$60 per barrel as the cuts would help ease the global glut of the past three years, according to Kuwait News Agency (Kuna).

Iranian oil minister Bijan Zanganeh also said on Tuesday he expected Opec to abide by the deal.

"While competing, we do have engagement," Iranian news agency Shana quoted him as saying.

Opec member Venezuela also said it will cut 95,000 bpd of oil production in the new year.

Statements from various officials "holds market expectations at a high level, but also entails some risk of disappointment if actual January production data shows output only ramping gradually toward the lower target levels," wrote Tim Evans, analyst at Citi Futures.

REUTERS