By Henning Gloystein
SINGAPORE (Reuters) – Oil dipped on lingering doubts that crude production cuts would go deep enough to curb a global fuel supply glut, with sentiment worsened by concerns over the health of the Chinese economy after it reported the steepest falls in exports since 2009.
Brent crude futures, the international benchmark for oil prices, were trading at $55.87 per barrel at 0816 GMT on Friday, down 14 cents from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 9 cents at $52.92 per barrel.
Record Chinese crude imports of 8.56 million barrels per day (bpd) in December helped buoy prices somewhat, traders said. But they could not hide underlying fears over the overall health of the world’s second-biggest economy.
Despite China’s oil thirst, overall exports – the country’s economic backbone – fell 7.7 percent in 2016 in what was the second annual decline in a row, and the worst since the depths of the global crisis in 2009.
In another sign that China’s crude imports do not fully represent the country’s fuel demand, exports of Chinese refined oil products last month rose nearly 25 percent on a year earlier to a record 5.35 million tonnes, well above November’s previous record of 4.85 million tonnes.
On the supply side, there was some market support from top crude exporter Saudi Arabia which said that its output had fallen below 10 million bpd, to levels last seen in early 2015.
However, hard evidence of export reductions has yet to emerge, two weeks into the month when the cuts by the Organization of Petroleum Exporting Countries (OPEC) and other producers like Russia were supposed to start. Many analysts expect compliance of 50-80 percent, at best.
“Any slip in the market’s confidence that producers will follow through on their promises may lead to sharp price corrections,” said French bank BNP Paribas.
BNP said that it expected WTI prices to average $56 per barrel in 2017, up $7 from its previous forecast, and Brent to average $58 per barrel, up $8 from its earlier estimate.
The U.S. Energy Information Administration said in its January outlook that it forecasts Brent and WTI to average $53 per barrel and $52 per barrel respectively in 2017.
Even if OPEC cuts its output as agreed, traders said that rising U.S. 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 over 1,000 energy market professionals showed that Brent prices in 2017 are expected to average around $55-$60 a barrel.
(Reporting by Henning Gloystein; Editing by Sonali Paul and Richard Pullin)