Oil prices rose on Monday in anticipation of tighter crude supply going into 2017 following the decision by OPEC and other producers to cut output to prop up prices.
Brent crude futures, the international benchmark for oil prices, were trading at $55.57 per barrel at 0401 GMT, up 36 cents, or 0.7 percent, from their last close.
US West Texas Intermediate (WTI) crude oil futures were up 43 cents, or 0.8 percent, at $52.33 a barrel.
Traders said the higher prices in front-month crude futures were due to expectations of a tighter market.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia have announced cutbacks of almost 1.8 million barrels per day (bpd) in oil production effective in January 2017 in an effort to bolster prices to reduce rampant global overproduction which has seen output outstrip consumption for over two years.
“With investors now expecting a relatively high level of compliance with the production cut agreements, prices should be well supported,” ANZ bank said on Monday.
“Saudi Arabia has stated its willingness to cut production below 10 million bpd if needed (down from around 10.5 million bpd currently), which should limit risk to the deal,” US bank Morgan Stanley said on Monday, adding that some of the non-compliance risk to the deal to cut output in 2017 came from Iraq, which increased its January loadings versus December.
ANZ bank said that “some weakness in US dollar also helped improve (oil) investor sentiment.”
The dollar has lost 0.8 percent against a basket of other leading currencies since hitting 2002 highs last week.
Swings in the dollar can affect oil demand as they influence fuel prices for any country using its own currency domestically.
Despite this, there were factors that weighed on markets, preventing prices — which remain relatively low — from rising more.
In the United States, which did not participate in the production cut deal, drilling for new oil has increased for seven weeks.
Drillers added 12 oil rigs in the week to Dec. 16, bringing the total to 510, the highest since January, though still below 541 rigs a year ago, energy services firm Baker Hughes said on Friday.
“Since its trough on May 27, producers have added 194 oil rigs (61 percent) in the US,” US bank Goldman Sachs said.
As a result, US oil production is edging up, rising from below 8.5 million bpd in July to almost 8.8 million bpd by mid-December.
Saudi Arabia cuts crude exports
Saudi Arabia’s crude oil exports fell in October by 176,000 barrels per day from the month before, despite high production, but its refined products shipments rose as the Kingdom expands its refining power, official data showed on Monday.
The world’s top exporter shipped 7.636 million barrels per day in October, down from 7.812 million bpd in September, according to data from the Joint Organizations Data Initiative (JODI).
The Kingdom pumped 10.625 million bpd in October, down from 10.650 million bpd in September, the data showed.
Saudi Arabia has maintained high output levels since mid-2014 aiming to defend market share against rival producers.
Saudi Arabia’s crude oil exports fell in October by 176,000 barrels per day from the month before, despite high production, but its refined products shipments rose as the Kingdom expands its refining power, official data showed on Monday.
The world’s top exporter shipped 7.636 million barrels per day in October, down from 7.812 million bpd in September, according to data from the Joint Organizations Data Initiative (JODI).
The Kingdom pumped 10.625 million bpd in October, down from 10.650 million bpd in September, the data showed.
Saudi Arabia has maintained high output levels since mid-2014 aiming to defend market share against rival producers.

Source:  Arab News