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Oil rebounds but skepticism over production cuts remain

Published 01/10/2017, 04:27 AM
© Reuters.  Oil prices rebound but doubts over output cuts linger

Investing.com - Oil prices edged slightly higher on Tuesday, after suffering their biggest one-day loss in six weeks in the prior session amid doubts over the implementation of a planned deal by global crude producers to scale back output.

Brent oil for March delivery on the ICE Futures Exchange in London tacked on 20 cents, or 0.4%, to $55.14 a barrel by 4:25AM ET (09:25GMT), after tumbling $2.16, or almost 4%, on Monday.

Elsewhere, crude oil for February delivery on the New York Mercantile Exchange added 21 cents, or 0.4%, to $52.17 a barrel. U.S. crude prices sank $2.03, or 3.8%, in the prior session.

January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.

The deal, if carried out as planned, should reduce global supply by about 2%.

However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.

There are also some worries in the market about rising supplies from Iran and Iraq, as well as increased output from Libya and Nigeria, which are both allowed to ramp up production as part of the OPEC deal.

Production increases in the U.S. also remained in focus. According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week increased by 4 to 529, the tenth straight weekly rise and a level not seen in more than a year.

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Some analysts have warned that the recent rally in prices could be self-defeating, as it encourages U.S. shale producers to drill more, adding to concerns over a global supply glut.

Elsewhere on Nymex, gasoline futures for February ticked up 0.9 cents, or 0.6% to $1.577 a gallon, while February heating oil tacked on 0.5 cents, or 0.3%, to $1.642 a gallon.

Natural gas futures for February delivery rose 5.2 cents, or 1.7%, to $3.155 per million British thermal units, after falling 5% to a seven-week low on Monday, as forecasts of mild January weather replaced predictions of severe cold.

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