Oil edges up, but strong dollar, OPEC cut doubts weigh

By By Devika Krishna Kumar Features Reuters

Oil rose slightly on Friday on increased buying ahead of the weekend, but a strong U.S. dollar and lingering doubts that not all OPEC producers would cut output in line with an agreement, pressured prices.

Continue Reading Below

End of week position-squaring combined with relatively low volumes during the first trading week of the year led to the market being choppy, traders said.

Brent crude futures were trading 19 cents higher at $57.08 per barrel at 11:34 a.m. EST, after moving in a $56.28-to-$57.47 range.

U.S. West Texas Intermediate (WTI) crude futures rose 24 cents at $54.00 a barrel, after trading between $53.32 and $54.32.

The contracts were on track for a slight gain on the week.

"There's a lot of volatility, or at least changes in direction," ABN Amro senior energy economist Hans van Cleef said. "People think the long-term trend is up, but after a gain of a few dollars, they take profit."

Continue Reading Below

The dollar gained broadly against major currencies after the U.S. non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year.

A stronger greenback makes oil more expensive for holders of other currencies.

While top exporter Saudi Arabia, along with fellow Gulf members Abu Dhabi and Kuwait, have shown signs of cutting production in line with an agreement reached by OPEC and other producers, market watchers have doubts about overall compliance.

Saudi Arabia's state oil producer Saudi Aramco has started talks with customers globally on possible cuts of 3 percent to 7 percent in February crude loadings.

A Kuwaiti oil official said that country had also reduced production in line with the deal, and there are also reports of supply cuts from Abu Dhabi.

"Market balances are unquestionably tightening, but concerns pertaining to the pace at which the global storage glut will be drawn down toward historically normal levels will be the focal point for the year ahead," said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

"While the market has centered its attention on the notional size of the announced cuts from both OPEC and Non-OPEC countries and whether or not the group will deliver on its promises, we believe that an important factor is being overlooked ... the deal inadvertently tightens the medium and heavy balances incrementally more than the light, sweet market."

The market was also watching for U.S. oil rig count data from energy services firm Baker Hughes Inc at about 1 p.m. EST.

(Additional reporting by Libby George in London, Henning Gloystein in SINGAPORE and Osamu Tsukimori in TOKYO; Editing by Marguerita Choy and Susan Thomas)