Oil rises near US$53 as Iraq says close to full Opec cut pledge

A worker checks the valves at Al-Sheiba oil refinery in the city of Basra, Iraq, on Jan 26, 2016.
A worker checks the valves at Al-Sheiba oil refinery in the city of Basra, Iraq, on Jan 26, 2016.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Oil advanced to trade near US$53 a barrel as Iraq said it's close to implementing its share of pledged output curbs agreed with Opec to trim bloated global inventories and stabilize the market.

Futures rose as much as 0.6 per cent in New York on Tuesday (Jan 24) after dropping 0.9 per cent on Monday. Iraq, the second-biggest Opec producer, has reduced supply by 180,000 barrels a day and will cut a further 30,000 a day by the end of the month, Oil Minister Jabbar Al-Luaibi said in an interview. In the US, crude inventories probably expanded for a third straight week, according to a Bloomberg survey before government data on Wednesday.

Oil has held above US$50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations agreed late last year to curb supply by about 1.8 million barrels a day. While Saudi Arabia says more than 80 per cent of the targeted reduction has been implemented since the deal took effect Jan 1, the International Energy Agency predicts a rebound in shale output as prices rise. US drillers last week added the most active rigs since 2013.

"The market is waiting to see how the Opec cuts and US supply situation plays out," said Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney. "There's a focus on producers and whether they are complying with their pledged cuts, but it's a waiting game at the moment."

West Texas Intermediate for March delivery gained as much as 29 cents to US$53.04 a barrel on the New York Mercantile Exchange and was at US$53.01 at 11:34am in Hong Kong. Total volume traded was about 56 per cent below the 100-day average. The contract fell 47 cents to US$52.75 on Monday. Front-month prices have averaged about US$52 a barrel since the start of December.

Brent for March settlement added as much as 33 cents, or 0.6 per cent, to US$55.56 a barrel on the London-based ICE Futures Europe exchange. The grade dropped 26 cents to US$55.23 on Monday. The global benchmark crude traded at a premium of US$2.51 to WTI.

While 90 per cent of Iraq's output cuts have come from fields operated by companies run by the federal government, Baghdad is also coordinating reductions with the semi-autonomous region of Kurdistan and international oil companies, Al-Luaibi said in London. It's too early to say if the cuts could be extended beyond the initially agreed six-month term, he said.