Oil up on Signs Producers to Comply With Cuts
Oil rose on Friday, edging closer to new 17-month highs, as producers showed signs of adhering to a global deal to reduce output.
Brent futures rose $1.07, or 2 percent, to $55.09 a barrel by 11:34 a.m. EST (1634 GMT). U.S. West Texas Intermediate (WTI) crude rose 91 cents, or 1.8 percent, to $51.81 per barrel.
That put both contracts on track to rise around 1 percent for the week, after easing less than 1 percent last week.
Earlier on Friday, the premium of the Brent front-month contract over the same U.S. contract
"The petroleum markets are extending their recovery from Thursday's low as some confidence in planned production cuts returns to the market," Tim Evans, Citi Futures' energy futures specialist, said in a note.
The Organization of the Petroleum Exporting Countries has agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1, its first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much.
Those deals, clinched over the past two weeks, have boosted expectations that a two-year supply overhang will clear soon and prices remain near highs last seen in July 2015.
Russia said on Friday that all of the country's oil companies, including top producer Rosneft, had agreed to reduce output.
Other oil producers including Kuwait and Saudi Arabia have notified customers that they will cut from January.
"While the market will eventually need to see some evidence of an actual reduction in output, talk of production cuts and the notices of lower allocations sent to refiners are sufficient to support market sentiment for now," Citi's Evans said.
The prospect of lower production led U.S. bank Goldman Sachs to raise its WTI price forecast for the second quarter of 2017 to $57.50 per barrel from $55.
For Brent, Goldman expects prices between $55 and $60 per barrel after the first half of 2017.
However, there are doubts about the willingness of other OPEC members to reduce output.
Iraq, OPEC's second-biggest producer after Saudi Arabia, has signed new deals that will increase its sales to Asian customers such as China and India despite its commitment to reduce output by 210,000 bpd.
Libya, which is allowed to ramp up production as part of the OPEC deal, is close to increasing output crimped by unrest after a group of oil guards said they reopened a long-blockaded pipeline linking some of the country's biggest oilfields. (By Scott DiSavino; Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by Susan Thomas and Paul Simao)