Price of oil up $1 as OPEC members cut production as promised

The price of oil went up by a dollar Thursday on news that OPEC producers were following through on an agreed output cut. AP Photo/Eric Gay

Oil prices jumped more than $1 a barrel on Thursday on news that key OPEC members were cutting production as promised and on forecasts of strong demand growth in China.

Brent crude oil rose $1.33 a barrel to a high of $56.43 before easing slightly to trade around $56.20 by 1445 GMT (9:45 a.m. ET). U.S. light crude was up $1.05 a barrel at $53.30.

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The Organization of the Petroleum Exporting Countries agreed in November to cut production to try to reduce a supply glut that has depressed prices for more than two years.

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Several OPEC members appear to be implementing the deal.

“All the focus is now on OPEC compliance, which seems to be moving ahead as planned,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.

Saudi Energy Minister Khalid al-Falih said on Thursday the kingdom had cut production to its lowest in almost two years, a move that would help accelerate a rebalancing of the global oil market.

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“The market first of all is extremely healthy,” Falih told a conference in Abu Dhabi, adding that global demand for oil would grow by well over 1 million barrels per day (bpd) in 2017 and the market would tighten in two to three years.

Oil prices would respond this year, Falih added.

Kuwaiti Oil Minister Essam al-Marzouq told the conference Kuwait had already cut its oil output by more than it promised under the OPEC deal, without giving further details.

Iraqi Oil Minister Jabar Ali al-Luaibi told reporters Iraq was “hoping for a better price”. Iraq had reduced its oil exports by 170,000 bpd and was cutting them by a further 40,000 bpd this week, he said.

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BMI Research said overall “compliance to the OPEC/non-OPEC oil production cut appears to be positive … We calculate compliance with production cuts at around 73 percent,” led by high compliance from members of the Gulf Cooperation Council, namely Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.

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Reflecting China’s growing fuel consumption, its net crude imports will rise 5.3 percent to 396 million tonnes in 2017, China National Petroleum Corp (CNPC) said on Thursday. CNPC said its crude demand will hit a record 594 million tonnes this year.

In the United States, traders said an inventory report published by the U.S. Energy Information Administration on Wednesday implied oversupply as crude stocks unexpectedly rose by 4.1 million barrels to 483.11 million barrels. [EIA/S]

Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Alison Williams

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