Oil Prices Jump Ahead of Producers' Compliance Meeting
Oil prices rose more than 2 percent on Friday on expectations that a weekend meeting of the world's top oil producers would demonstrate compliance to a global output cut deal, but rising U.S. drilling activity limited gains.
Members of the Organization of the Petroleum Exporting Countries and some other producing countries including Russia, will meet in Vienna to establish a mechanism to verify compliance with a deal to cut output 1.8 million barrels per day (bpd), OPEC's secretary general told Reuters.
Saudi Arabia's energy minister said 1.5 million bpd had already been taken out of the market.
"The petroleum markets are moving higher in Friday trade on the latest round of positive talk about how much supply oil producers have taken offline ahead of Sunday's review by OPEC and non-OPEC representatives in Vienna," Tim Evans, Citi Futures' energy futures specialist, said in a note.
Brent crude rose by $1.24, or 2.3 percent, to $55.4 a barrel by 1:23 p.m. EST (1823 GMT).
U.S. crude for February delivery was up by $1.12, or 2.2 percent, at $52.49 a barrel ahead of expiry. The more active March contract rose $1.11, or 2.13 percent, to $53.23.
Prices pared gains after data from energy services firm Baker Hughes showed U.S. energy companies this week added the most oil rigs in nearly four years.
Swelling oil stockpiles in the U.S. and rising shale production could threaten market rebalancing, analysts said.
"For a lasting balance to be restored on the oil market and the very high stocks reduced, the agreement will need to be strictly implemented over a considerable period of time," Commerzbank said in a note.
"This is particularly true given that U.S. oil production is rising again and given that the oil supply from Libya and Nigeria may be expanded."
U.S. crude inventories rose unexpectedly last week as refineries sharply slowed production, while gasoline stocks soared amid weak demand, the Energy Information Administration said on Thursday.
Crude inventories soared 2.3 million barrels in the week to Jan. 13, while gasoline builds were much larger than expected, especially on the U.S. East Coast where stocks swelled to the highest level on record for this time of year.
Libya's National Oil Corporation (NOC) said production had now climbed to 722,000 bpd, resuming its rise after poor weather had caused a small dip.
Bjarne Schieldrop, chief commodities analyst at SEB Markets, said Brent crude was starting to move into a trading range around $55 as the production cut deal placed a floor price of $50, while U.S. shale oil producers capped the upside at $60.
(By Devika Krishna Kumar; Additional reporting by Karolin Schaps in London, Naveen Thukral in Singapore; Editing by Marguerita Choy and David Evans)