Picture: REUTERS
Picture: REUTERS

London — Oil prices are on track to end the week lower on lingering doubt over the extent of Opec output cuts and China’s economic health.

Brent crude futures were trading 20c down at $55.81 a barrel on Friday morning. US West Texas Intermediate crude futures fell 23c to $52.78.

Record Chinese crude imports of 8.56-million barrels a day (bpd) in December helped buoy prices somewhat, traders said, but they could not hide underlying worries about the health of the world’s second-biggest economy.

Despite China’s oil thirst, overall exports — the country’s economic backbone — fell 7.7% last year, its second annual drop running and the worst since the depths of the global crisis in 2009.

Exports of Chinese refined oil products last month rose nearly 25% year on year to a record 5.35-million tonnes, well above the previous November record of 4.85-million.

On the supply side, there was some market support from top exporter Saudi Arabia, which said that its output had fallen below 10-million bpd to levels last seen in February 2015 and it expected to make even deeper cuts next month.

However, hard evidence of export reductions has yet to emerge, two weeks into the month in which the cuts by Opec and other producers, such as Russia, were meant to start. Many expect compliance of 50%-80% at best.

"As the Saudis hint at even deeper reductions in February, assumptions are rife that its enthusiastic approach to output cuts is an admission that cheating is expected on the part of other producers," said Stephen Brennock of oil brokerage PVM.

The US Energy Information Administration said in its January outlook that it expected Brent and WTI to average $53 and $52 a barrel respectively in 2017.

Even if Opec cuts its output as agreed, traders said that rising US shale output and increasing supply from Opec members Nigeria and Libya, which were exempt from the pact, might offset any reductions.

An informal Reuters survey of more than 1,000 energy market professionals showed that Brent prices in 2017 are expected to average about $55-$60 a barrel.

Reuters

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