Oil set for first annual gain in 3 years

Crude oil storage tanks seen in Bojonegoro, East Java, Indonesia, on Dec 8, 2016.
Crude oil storage tanks seen in Bojonegoro, East Java, Indonesia, on Dec 8, 2016. PHOTO: BLOOMBERG

HONG KONG (BLOOMBERG) - Oil headed for its first annual advance in three years before supply cuts from Opec and other producing nations next month intended to stabilize the market and reduce swelling global inventories.

Futures added 0.4 per cent in New York after losing 0.5 per cent on Thursday, snapping an eight-day winning streak, as US crude inventories unexpectedly expanded a second week.

Oil is set for its biggest annual gain since 2009 as the Organization of Petroleum Exporting Countries and 11 nations from outside the group push ahead with a plan to cut output to trim the surplus. Focus will soon turn to compliance and whether producers will stick to their commitments. In the US, crude inventories remain at the highest seasonal level in more than three decades, according to weekly data compiled by the EIA since 1982.

"Going forward, the most important thing will be the unity of Opec," said Takayuki Nogami, chief economist at state-run Japan Oil, Gas and Metals National Corp. "They may initially comply with the agreement, but once one country stops doing so, there is a risk that everyone else will follow suit."

West Texas Intermediate for February delivery was at US$53.99 a barrel on the New York Mercantile Exchange, up 22 cents at 7:55am in London. The contract fell 29 cents to US$53.77 on Thursday. Total volume traded was about 51 per cent below the 100-day average. Prices are up 9.2 per cent this month and about 46 per cent this year.

Brent for March settlement rose 27 cents to US$57.12 a barrel on the London-based ICE Futures Europe exchange. The February contract expired on Thursday after losing 8 cents to US$56.14. Front-month prices are up about 53 per cent this year. The global benchmark crude traded at a premium of US$2.18 to WTI.