Oil prices rose about 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.
A weekend meeting in Vienna of members of the Organization of the Petroleum Exporting Countries (OPEC) and some producers outside of the group, including Russia.
It will establish a compliance mechanism to verify producers are sticking to a deal to reduce output by 1.8 million barrels per day (bpd), OPEC’s secretary general told Reuters.
Saudi Arabia’s energy minister said that 1.5 million bpd had already been taken out of the market, adding to signs that the oil market is rebalancing.
“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.
U.S. West Texas Intermediate (WTI) crude oil futures settled up $1.05, 2 percent, at $52.42 a barrel.
International benchmark Brent crude prices were up $1.34, or 2.5 percent, at $55.50 a barrel by 2:33 p.m. ET (1933 GMT).
Natural gas ended trading down nearly 5 percent on forecasts for warmer winter weather.
Oil prices briefly pared gains after oilfield services firm Baker Hughes reported its weekly count of oil rigs operating in the United States increased by 29 to 551, compared with 522 at this time last year.
That marked the largest weekly increase since a recovery in the rig count began in June, and the 11th week in 12 that drillers added rigs.
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.
The market was also eyeing U.S. drilling rig count data due after 1 p.m. as increased exploration and more efficient wells were boosting oil production.
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 centered around $55 a barrel as the production cut deal had placed a floor price of $50 a barrel.
While U.S. shale oil producers were capping the upside at $60 a barrel.
“As a new consensus is starting to form, the fog around the oil market balance is starting to clear and the oil price is likely going to start to stabilise,” he said.