Oil edged lower on Friday ahead of the Christmas and New Year holiday week as the market waited to see how Opec would manage its planned output cuts with Libya expecting to boost production. Brent futures for February delivery were down 16 cents, or 0.3 percent, at $54.89 a barrel by 10:29 am EST (1529 GMT). US West Texas Intermediate crude fell 22 cents, or 0.4 percent, to $52.73 per barrel.
That put WTI on track for its first daily decline in six sessions. For the week, the US contract was set to rise for a second week in a row, gaining just 2 percent during that time, while Brent looked like it would slip lower for a second week in three. "The complex has begun the pre-holiday trade under moderate downside pressures that are erasing yesterday's gains," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
"This week's trade has offered no significant surprises as price consolidation continues with the market adopting a wait and see attitude regarding Opec's execution of planned production curtailments," Ritterbusch said. The Organisation of Petroleum Exporting Countries and non-Opec members over the past few weeks agreed to lower output by almost 1.8 million barrels per day (bpd) from January 1.
While major Opec producers including Saudi Arabia and Iraq have told customers that supply will be cut in line with the Opec deal, Libya and Nigeria are exempt because conflict has already curbed their output. Libya's National Oil Corp hopes to add 270,000 bpd to national production over the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields, Sharara and El Feel.
Also weighing on the market this week was a surprise increase in US crude stocks reported on Wednesday in the government's weekly petroleum report, and the prospect of sales beginning in January of crude from the US Strategic Petroleum Reserve (SPR). "Crude failed to maintain gains this week following the unexpected build in US stockpiles, which revived the oversupply concerns," said Lukman Otunuga, a research analyst with FXTM.
"With some anxieties still lingering over the compliance side of the unexpected cut agreement, oil could end up extremely volatile, with losses expected if production fails to decline." The volume of extra oil reaching the market from the SPR could be sizeable. Consultancy Poten & Partners said on Thursday the reserve could be drawn down by some 190 million barrels between 2017 and 2025 if all planned sales went ahead.
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