Investing.com - Sharp bouts of price gains are likely in oil as Saudi Arabia ratchets up efforts to raise the visibility of OPEC's output cuts. But patience may also be key for oil producers, with the West's energy watchdog anticipating any market recovery to be more gradual than immediate.
Futures of New York-traded West Texas Intermediate crude and London's Brent rose as much as 3% on Friday as the OPEC+ alliance of 25 oil producers listed cuts by each country in the group to address market concerns that the supply-demand rebalancing of the past six weeks lacked transparency. OPEC+ has committed to cut at least 1.2 million barrels per day through this year and the Saudis have hinted they will do more to get to $80 per barrel.
WTI was up $1.63, or 3.1%, at $53.70 per barrel by 13:05 PM ET (18:05 GMT), after a 0.5% slide in the previous session.
Brent, the global oil benchmark, rose by $1.47, or 2.4%, to $62.65, after settling 0.25% down on Thursday.
For the week, both benchmarks were on track to a gain of more than 3%.
On top of that, WTI is up nearly 18% on the year and nearly 27% higher from its Christmas Eve low of $42.36. Brent is showing a 16% gain year to date.
Friday's rally was also spurred by a Bloomberg report that the Saudi and Russian energy ministers had spoken on the phone Monday and that Moscow was trying to accelerate its contribution to the OPEC+ cuts and make them run more "smoothly". The Russian minister Alexander Novak was quoted saying that he would try to discuss the cuts with his Saudi counterpart Khalid al-Falih at the Jan. 22-25 Davos World Economic Forum.
Production cuts aside, another boost for crude futures came from a Bloomberg report that China, the world's largest oil buyer, had offered to raise its annual imports from the U.S. by more than $1 trillion to offset their trade war. But Trade Representative Robert Lighthizer was also reported to be resisting the offer as Beijing planned to make the upgrade over a six-year period, rather than instantly, as preferred by the Trump administration.
Higher prices of stocks on Wall Street also helped oil, with the three main U.S. equity indexes all showing gains of more than 1% each.
Gains in oil were slower in Asian and European trading after the International Energy Agency said it expected the market rebalancing to be gradual despite OPEC cuts, as the U.S. in 2019 “will reinforce its leadership as the world’s number one crude producer”.
“The journey to a balanced market will take time, and is more likely to be a marathon than a sprint,” the Paris-based IEA, which looks over the interest of Western oil consumers, said in its monthly oil market report.
Scott Shelton, ICAP (LON:NXGN)'s Durham, N.C.-based energy futures broker and commentator, agreed, adding: "The IEA report was a good synopsis of the market."
The Energy Information Administration said that U.S. crude production had reached 11.9 million bpd as of last week, one million more than averaged in 2018. It is now forecasting an output of 13 million bpd by 2020 and for the U.S. to become a net exporter of oil by then.