Futures climbed up to 2.8% yesterday in New York after adding 45% last year, the biggest annual gain since 2009. Officials from Oman and Kuwait told local media they’re cutting oil production in January, fulfilling pledges that they and 22 other producers made on December 10.
Prices also advanced as China’s manufacturing purchasing managers index stabilised near a post-2012 high, signalling demand may be supported in the world’s second-biggest oil user.
Oil advanced for the first time in three years in 2016 as the Organisation of Petroleum Exporting Countries and 11 other nations agreed to cut output starting this month in an effort to reduce bloated global stockpiles.
Prices, which eased in late December, are surpassing the peaks reached just after the deal was finalised, as Kuwait and Oman give the first signs the curbs are being implemented.
“The market’s moving on expectations that the production cuts are going to be both real and effective,” Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis, said.
“This move assumes there will be a significant drop in inventories,” he said.
Brent for March settlement climbed $1.45, or 2.6%, to $58.27 on the London-based ICE Futures Europe exchange. The global benchmark touched $58.37, the highest since July 15, 2015. Brent rose 52% last year, the most since 2009.
Opec member Kuwait has reduced output by 130,000 barrels a day to about 2.75 million a day, Al-Anba newspaper reported, citing Kuwait Oil chief executive Jamal Jaafer. Oman is cutting 45,000 barrels a day from 1.01 million, the oil ministry’s director of marketing Ali Al-Riyami said on Oman TV.
Opec nations and non-members including Russia and Mexico have agreed to trim output by about 1.8 million barrels a day. Iraq will start implementing cuts by reducing heavy and medium grades, the nation’s oil minister Jabbar al-Luaibi told Kuwaiti daily al-Jarida.
China’s manufacturing purchasing managers index edged down to 51.4 in December from 51.7 in November, while a gauge of factory input prices surged to a five-year high of 69.6.
“The big upside came after the release of the Chinese PMI numbers, which were just stellar,” John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said.