Oil prices rose on Friday after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January.
Supply from the 11 members of the Organisation of the Petroleum Exporting Countries (OPEC) with production targets under the deal fell to 29.92 million barrels per day, according to the average assessments of the six secondary sources OPEC uses to monitor output, or a 92 percent compliance.
The International Energy Agency (IEA) – one of OPEC’s six sources – said the cuts in January equated to 90 percent of the agreed reductions in output, far higher than the initial 60 percent compliance with a 2009 OPEC deal.
“Some producers, notably Saudi Arabia, are appearing to cut by more than required,” the agency said in a report.
Crude has benefited from recent strength in gasoline prices as a glut seems to be gradually eroding.
Gasoline futures were trading up about 0.9 percent on Friday.
Another increase in U.S. oil rigs held down gains in the afternoon. Drillers added eight oil rigs in the week to Feb. 10, bringing the total count up to 591, the most since October 2015, energy services firm Baker Hughes Inc said on Friday.
“From a psychological viewpoint, a big number to close above would be $54, and the rig count probably made that a little less likely,” said Phil Flynn, analyst at Price Futures Group in Chicago, speaking about U.S. crude.
Bjarne Schieldrop, chief commodities analyst at SEB, said he expects 198 new U.S. oil rigs to come into action this year, with 51 added so far this year.
“We calculate that one extra rig added today will lead to a stream of new wells which cumulatively will produce 5.3 million barrels to the end of 2019,” he said.
The IEA, which advises industrial nations on energy policy, said if current compliance levels hold, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day (bpd) in the next six months.
The agency also raised global oil demand growth expectations for 2017 to 1.4 million bpd, up 100,000 bpd from its previous estimate.
Nevertheless, producers will probably have to extend the production cuts beyond six months if they want to achieve their goal of balancing the oil market.