Oil prices surged on Wednesday, January 11, triggered by reports of Saudi supply cuts to Asia. However, gains were capped by a lack of detail about the reductions.
Prices for Brent futures, the international benchmark for oil prices, were trading at $53.94 per barrel at 0800 GMT, up 30 cents from their previous close. U.S. West Texas Intermediate (WTI) crude futures were at $51.11 a barrel, up 29 cents.
Traders said the gains were a result of mounting reports that Saudi Arabia, the world’s top oil exporter, was cutting crude supplies slightly from contracted volumes in February, including to India and Malaysia.
But there are still plenty of signs that global supplies are ample. Seeking to plug any supply gap left by the OPEC production cuts, European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.
Many observers also still doubt the planned cuts will go deep enough to rebalance a market that has suffered from oversupply for the past two years. Both Brent and WTI futures were down around 6 percent this month.
“Traders continued to fret about rising U.S. supply and compliance by OPEC to agreed-upon production cuts,” ANZ bank said.
The U.S. Energy Information Administration (EIA) said on Tuesday that American crude production in 2017 would rise by 110,000 barrels per day (bpd) to 9 million bpd.
Energy consultancy Wood Mackenzie also said oil and gas companies will increase spending by 3 percent to $450 billion in 2017 globally, Reuters reports.
