NEW YORK (REUTERS) - Oil prices edged higher on Tuesday (Jan 17) propped up by a decline in the US dollar and comments by Saudi Arabia that it would adhere to Opec's commitment to cut output.
The dollar fell to a near six-week low against a basket of currencies after US President-elect Donald Trump said that the strong greenback was hurting US competitiveness.
A weaker greenback makes dollar-denominated crude less expensive for users of other currencies.
"The oil market is actually weaker than it looks because it is being propped up by the weak dollar," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey.
Brent futures were up 15 cents, or 0.3 per cent, at US$56.01 a barrel by 1.49 pm EST (1849 GMT), while US West Texas Intermediate (WTI) crude rose 52 cents, or 1 per cent, to US$52.89 per barrel. Both contracts were up by US$1 earlier Tuesday.
US crude's discount to Brent WTCLc1-LCOc1 widened to its biggest in nearly five months after US President-elect Donald Trump criticised a part of Republicans' corporate-tax plan, traders said.
Oil drew some support earlier Tuesday from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between Opec and other producers, such as Russia.
Under the agreement, the Organization of the Petroleum Exporting Countries (Opec), Russia and other non-Opec producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.
Earlier gains, however, were capped by forecasts for rising US and Russian production and scepticism that Opec as a whole would comply with its commitment to reduce supplies.
Russian oil production is expected to reach another post-Soviet record high in 2017 after a global deal to cut output expires at the end of June, according to a Reuters poll of analysts.
"Strong and rising production out of Libya, Iran, Iraq and Nigeria will be acting to negate impact of Opec/Russia output curtailments," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Ritterbusch also noted that US production was also on the upswing with last week's reported upside acceleration likely to be sustained to about 9.2 million barrels per day by the end of the quarter.
Oil exports from Iraq's southern terminals have fallen so far in January, according to loading data and an industry source, a sign that Opec's second-largest producer is following through on the group's decision to cut output.