Oil prices shoot-up on Tuesday, the first trading day of 2017, buoyed by hopes that a deal between OPEC and non-OPEC members to cut production would drain a global supply glut.
The deal to cut production kicked in on Sunday.
Benchmark North Sea Brent crude LCOc1 was up 40 cents at 57.22 dollars a barrel by early trading while the U.S. light crude oil CLc1 was up 40 cents at 54.12 dollars a barrel.
Oil futures markets were closed on Monday for New Year public holidays.
Jan. 1 marked the official start of a deal agreed by OPEC and other exporters such as Russia to reduce output by almost 1.8 million barrels per day (bpd).
“First signals suggest the OPEC and non-OPEC production cuts are raising hopes that the global oil oversupply will diminish,” said Hans van Cleef, Senior Energy Economist at ABN AMRO Bank N.V. in Amsterdam.
Ric Spooner, Chief Market Analyst at CMC Markets, agreed.
“Markets will be looking for anecdotal evidence for production cuts.
“The most likely scenario is OPEC and non-OPEC member countries will be committed to the deal, especially in early stages,” Spooner said.
Libya, one of two OPEC countries exempt from the output cuts, has increased its production to 685,000 bpd, from around 600,000 bpd in December, an official at the National Oil Corporation, said on Sunday.
Elsewhere, non-OPEC Middle Eastern oil producer, Oman, told customers last week that it would cut its crude oil term allocation volumes by five per cent in March.
Non-OPEC Russia’s oil production in December remained unchanged at 11.21 million bpd, near a 30-year high.
However, Russia is preparing to cut output by 300,000 bpd in the first half of 2017 in its contribution to the accord.