London/ Singapore: Oil prices rose slightly on Thursday after reports Saudi Arabia had started talks with customers about a reduction of up to 7% in crude sales in February to support an attempt by Organization of the Petroleum Exporting Countries (Opec) to reduce global supply.
The Opec promised in November to cut output to help prop up prices. Under the deal, Saudi Arabia agreed to cut output by 486,000 barrels per day (bpd), or 4.61% of its October output of 10.544 million bpd.
“Aramco is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios,” one source told Reuters. “Nothing is confirmed yet,” the source said, adding the scenarios were for cuts of 3-7%.
Investors have been suspicious that Opec may not cut as much as promised, but several sources told Reuters on Thursday that the world’s biggest oil exporter would comply with the Opec cuts.
Benchmark Brent crude oil was up 20 cents a barrel at $56.66 by 4.40pm. US light crude oil was up 20 cents a barrel at $53.46. Both contracts rose by around 2% on Wednesday.
“There remains a question mark over whether Opec, with a long history of non-compliance, will actually follow through (with the cuts). Very few respondents expect full compliance,” Singapore Exchange (SGX) said on Thursday, citing results from a survey of its participants.
“Three-quarters of those surveyed went for (crude) prices averaging within the current $50-$60 a barrel range (for 2017),” SGX added. Analysts at US bank Goldman Sachs said even if Opec reduced production as promised, there was “only moderate oil spot price upside given the expected supply response to higher oil prices and new production”.
The US bank said it expected Brent prices to peak at $59 a barrel by mid-2017.
In another sign of compliance with the cuts, Abu Dhabi National Oil Company (ADNOC) has scheduled maintenance at oilfields for March and April, although it was not immediately clear how much exports might fall. Oil prices also found support from an American Petroleum Institute (API) report showing US crude inventories fell 7.4 million barrels last week.
A Reuters survey forecast the EIA report would show US crude stocks declined by about 2.2 million barrels in the week to 30 December.