Saudi Arabia's Aramco may cut oil supply (Reuters)
Oil prices rose slightly after reports Saudi Arabia had started talks with customers about a reduction of up to 7 per cent in crude sales in February to support an attempt by OPEC to reduce global supply.
The Organization of the Petroleum Exporting Countries (OPEC) promised in November to cut output to help prop up prices. Under the deal, Saudi Arabia agreed to cut output by 486,000 barrels per day (bpd), or 4.61 per cent of its October output of 10.544 million bpd.
"Aramco (Saudi Arabia's state oil company) is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios," a source said. "Nothing is confirmed yet," the source said, adding the scenarios were for cuts of 3-7 per cent.
Investors have been suspicious that OPEC may not cut as much as promised, but several sources have expressed that they believe the world's biggest oil exporter would comply with the OPEC cuts.
"There remains a question mark over whether OPEC, with a long history of non-compliance, will actually follow through with the cuts. Very few respondents expect full compliance," Singapore Exchange (SGX) said, citing results from a survey.
Benchmark Brent crude oil was up 20 cents a barrel at $56.66 in mid-day trade. US light crude oil was up 20 cents a barrel at $53.46.
"There remains a question mark over whether OPEC, with a long history of non-compliance, will actually follow through with the cuts. Very few respondents expect full compliance," Singapore Exchange (SGX) said, citing results from a survey. "Three-quarters of those surveyed went for crude prices averaging within the current $50-$60 a barrel range for 2017," SGX added.
Analysts at US bank Goldman Sachs said even if OPEC reduced production as promised, there was "only moderate oil spot price upside given the expected supply response to higher oil prices and new production".
The US bank said it expected Brent prices to peak at $59 a barrel by mid-2017.
In another sign of compliance with the cuts, Abu Dhabi National Oil Company has scheduled maintenance at oilfields for March and April, although it was not immediately clear how much exports might fall.