Oil prices rose nearly 2 percent on Friday after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January.
Supply from the 11 members of the Organization of the Petroleum Exporting Countries with production targets under the deal fell to 29.921 million barrels per day, according to the average assessments of the six secondary sources OPEC uses to monitor output, or a 92 percent compliance.
The International Energy Agency (IEA) – one of OPEC’s six sources – said the cuts in January equated to 90 percent of the agreed reductions in output, far higher than the initial 60 percent compliance with a 2009 OPEC deal.
“Some producers, notably Saudi Arabia, (are) appearing to cut by more than required,” the agency said in a report.
While the deal has boosted oil prices, Capital Economics analysts said in a note, “we think U.S. production is likely to rebound and that it will be strong growth in demand that will eventually eat into stocks and rebalance the market.”
Global benchmark Brent crude LCOc1 was up $1.07, or 1.92 percent, at $56.70 a barrel by 10:38 a.m. EST (1538 GMT). It touched a session high of $56.76.
U.S. West Texas Intermediate (WTI) crude futures CLc1 traded up 99 cents, or 1.87 percent, at $53.99 a barrel.
Brent was on track for its first weekly drop in four weeks while U.S. crude headed for its fourth straight week of gains.
Crude has also benefited from recent strength in gasoline prices RBC1 as a glut seems to be gradually eroding. [EIA/S]
Gasoline futures were leading the energy complex on Friday, trading up about 2.2 percent.
The IEA, which advises industrial nations on energy policy, said if current compliance levels hold, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day (bpd) in the next six months.
The agency also raised global oil demand growth expectations for 2017 to 1.4 million bpd, up 100,000 bpd from its previous estimate.