(Bloomberg) -- Oil climbed, posting the biggest two-day gain in almost six weeks, after Saudi Arabia said it cut production even more than required by an OPEC deal.
Futures increased 1.5 percent in New York as Saudi Arabian Energy Minister Khalid al-Falih said the kingdom reduced output to less than 10 million barrels a day, going beyond its obligations under an accord between OPEC and other producers to curb production. Energy Information Administration data on Wednesday showed that U.S. refineries used 17.1 million barrels a day of crude last week, the most in weekly data compiled since 1989. Crude output rose to the highest level since April and the dollar weakened.
Crude has advanced since the deal among OPEC and 11 other nations to temper global supply, but it hasn’t been able to sustain that rally above $55 a barrel amid concern that rising prices will spur more production, especially in the U.S. While Middle East producers have signaled they’re sticking to the pledged reductions, the U.S. government recently raised this year’s output forecast, and explorers have added drilling rigs for 10 straight weeks.
“Whether or not OPEC proves to be fully compliant in their cuts, the market is impressed with their ability to overcome political and fiscal issues, to band together and create a floor,” Bruno Stanziale, director of commodity strategy at Eurasia Group, said by telephone. “It all rests in the hands of the U.S. shale oil producers. The degree to which producers get back in the field will dictate the cap of this market.”
U.S. crude inventories rose by 4.1 million barrels last week, the EIA reported, while analysts surveyed by Bloomberg had projected a 1.5 million-barrel gain. Crude production increased by 176,000 barrels a day to 8.95 million barrels a day.
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West Texas Intermediate for February delivery rose 76 cents to settle at $53.01 a barrel on the New York Mercantile Exchange. Total volume traded was 32 percent above the 100-day average.
Brent for March settlement climbed 91 cents to settle at $56.01 a barrel on the London-based ICE Futures Europe exchange. The global benchmark was at a premium of $2.17 to March WTI.
Oil is rising due to “chatter out of OPEC right now that they are committing to the cuts,” Michael Loewen, commodities strategist at Scotiabank in Toronto, said by telephone. “Crude is going to trade higher on the dollar and OPEC commentary. I would almost call it OPEC hopes and dollar dreams.”
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.5 percent. A weaker U.S. currency increases the appeal of dollar-denominated raw materials as an investment.
Saudi Arabia, currently producing at a 22-month low, will consider renewing its pledge to reduce its oil output in six months, al-Falih said. The world’s biggest oil exporter plans to meet members of OPEC in May at their bi-annual meeting in Vienna to assess the market and the group’s output policy.
An oil monitoring meeting later this month in Vienna will evaluate compliance with the producer deal to cut output, Energy Minister Alexander Novak said. Russia is ready to discuss oil export monitoring at the meeting as well, but has not received any proposals on the issue, he said.
Algeria will cut its oil output by 60,000 barrels a day in January, more than the previously agreed upon 50,000 barrels a day as part of the OPEC deal, Algeria’s Energy Minister Noureddine Boutarfa told Bloomberg.
“Even if the market retains its long bias, and producers continue to send reassuring messages relative to the follow-through on their pledges, we are still faced with a lot of the move based on sentiment,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by message. “We will not have hard data to evaluate what producers are doing until early February. In the meantime, the price moves can prove erratic.”
- Libya’s Zawiya oil port to start loading on Friday, according to a person familiar with the matter.
- Middle East crude shipments will fall by 480,000 barrels a day to Jan. 28, tanker-tracker Oil Movements said in a weekly report.
- The United Arab Emirates and other Gulf producers have complied with cuts agreed under the OPEC output deal, U.A.E. Energy Minister Suhail Al Mazrouei said.
- Iraq is in talks with international companies to trim production in order to comply with the OPEC accord, and will arrange for the semi-autonomous Kurdish region to reduce its output, Oil Minister Jabbar al-Luaibi said.
--With assistance from Perry Williams Ben Sharples and Grant Smith To contact the reporter on this story: Jessica Summers in New York at firstname.lastname@example.org. To contact the editors responsible for this story: James Herron at email@example.com, Jim Efstathiou Jr., Carlos Caminada
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