Oil prices firm on USA crude inventory fall, record auto sales

Oil prices firm on USA crude inventory fall, record auto sales”

Saudi Arabia has forecast its revenue from crude oil will significantly rise in 2017, as prices show a positive trend after the deal between OPEC, Russia and other producers to cut output.

In late 2016, the OPEC (Organization of the Petroleum Exporting Countries) had chose to cut crude oil production and 11 non-OPEC nations had agreed to reduce production by 558,000 barrels per day.

West Texas Intermediate hit an 18-month high of $55.24, up $1.52/bbl, also its highest since July 2015, before slipping to around $54.95.

The organization reached a historic deal last month with Russian Federation and other non-members to cut global production by about 1.8 million barrels a day for six months starting January.

Members of OPEC in November agreed their first output cut since 2008 in an attempt to stabilize oil prices.

"Although this development appeared to come as a surprise to the market, this should have been expected as initial adherence to the agreed upon production reduction is apt to be quite high at least 80 to 85 per cent", Ritterbusch added.

"In the face of a further strong rise in United States oil rigs in the first half of this year, we think it will be hard for Opec to agree to roll forward their production cuts into H2 2017", he said.

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International Brent crude oil prices LCOc1 were trading up 31 cents, or 0.55 percent, at $57.13 a barrel at 0203 GMT on Tuesday - close to last year's high of $57.89 per barrel, hit on December 12. US light crude oil was down 10 cents a barrel at $53.16.

Early surveys for OPEC production in December point to a drop in output (see here and here) - but this would appear to be led by falling Nigerian flows, as opposed to material losses elsewhere.

Some investors also believe that several countries may not stick to the production-cut plan.

While reports of the OPEC deal holding strong into the new year boosted prices, increased production from USA oil and gas companies as well as a stronger dollar could create headwinds for oil prices.

Oil market turbulence caused oil prices to plunge from $115 per barrel in June 2014 to less than $30 per barrel in January 2016, causing hardship for oil exporters.

The agreement - which was effective as of January 1 - is meant to address a supply glut in a bid to buoy floundering prices. While producers including Kuwait, Iraq and Oman say they've begun to curtail output, an increase in volumes from countries such as Libya - spared from cuts - could put pressure on others.

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