A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Russia, holds some of the richest shale reserves and seeks to use the same technologies that sparked an industrial boom in the US. File Picture: BLOOMBERG
A gas flare burns at Russian oil refinery, operated by OAO Lukoil. in Russia. Russia, holds some of the richest shale reserves and seeks to use the same technologies that sparked an industrial boom in the US. File Picture: BLOOMBERG

Singapore — Oil prices edged up on Friday, lifted by a report that producer club Opec could extend an output cut aimed at reining in a global fuel supply overhang.

Brent crude futures were trading at $55.76 a barrel at 3.11am GMT, up 11c from their last close.

US West Texas Intermediate (WTI) crude futures, were up 10c at $53.46 a barrel.

Opec and other producers including Russia plan to cut output by almost 1.8-million barrels a day during the first half of 2017, and estimates suggest compliance by Opec is about 90%.

The cuts are aimed at curbing oversupply that has dogged markets since 2014. To help rebalance the market, Opec sources told Reuters that the supply reduction pact could be extended if all major producers showed "effective co-operation".

For now, inventories remain bloated and supplies high, especially in the US.

Recent price movements reflect this, with Brent and WTI trading within a $5 a barrel price range this year, in what has become the longest and most range-bound period since a price slump began in mid-2014.

"Despite the headlines, the massive inventory glut in both oil and [petrol] continues to thwart any upward momentum," said Stephen Innes, senior trader at Oanda in Singapore.

In the US, rising output has helped push up crude and fuel stocks to record highs.

In Asia, oil flows into the region remain as high as they were before the production cuts, data in Thomson Reuters Eikon shows, as exporters shield their big customers in a fight for market share.

This comes amid signs of stuttering demand growth in core markets, China and India.

In India, fuel demand growth fell in January, while in China sagging car sales and soaring petrol and diesel exports also point to a slowdown in growth.

That leaves Europe, where Opec has significantly cut supplies. However, Eikon data shows rising North Sea oil exports to Asia, indicating there is no real supply shortage there either.

Despite the ongoing glut, analysts expect oil markets to tighten in the longer term.

"In the fourth quarter of 2018, global oil demand will most likely surpass 100-million barrels a day," AB Bernstein said on Friday in a note to clients.

"If oil prices stay around $60 a barrel and GDP growth over 3% per annum, then oil demand growth will be stronger over the next five years, than the previous decade. What we are witnessing is a rather surprising renaissance of oil consumption," it added.

Reuters

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