* OPEC, non-OPEC producers agree broad production cut from
* Saudi Aramco informs customers it will reduce from January
* Saudis targeting U.S. to cut excessive stocks, arbitrage -
* Oil market to move into 0.8 mln bpd deficit in 1st half of
(Adds Barclays comment, updates prices)
By Henning Gloystein
SINGAPORE, Dec 12 Oil prices shot to their
highest levels since mid-2015 on Monday after OPEC and other
producers reached their first deal since 2001 to jointly reduce
output in order to rein in oversupply and prop up markets.
Brent crude, the international benchmark for oil
prices, soared to $57.89 per barrel in overnight trading between
Sunday and Monday, the highest level since July 2015.
U.S. West Texas Intermediate (WTI) crude also hit a
July 2015 high of $54.51 a barrel.
Brent and WTI eased to $56.83 and $54.20 respectively by
0751 GMT, but were both still up over 4 percent from their last
With the deal signed after almost a year of arguing within
the Organization of the Petroleum Exporting Countries and
mistrust in the willingness of non-OPEC Russia to participate,
focus is switching to compliance of the agreement.
"We believe that the observation of the OPEC-11 and non-OPEC
11 production cuts is required to sustainably support... oil
prices to our 1H17 WTI price forecast of $55 a barrel," Goldman
"This forecast reflects an effective 1.0 million barrels per
day (bpd) cut vs. the 1.6 million bpd announced cut and greater
compliance to the announced cuts is therefore an upside risk to
Goldman Sachs forecast full compliance would be worth an
extra $6 per barrel to its price forecast.
AB Bernstein said the agreed deal "amounts to an aggregate
supply cut of 1.76 million barrels per day (bpd) from 24
countries which currently produce 52.6 million bpd, or 54
percent of world oil supply."
Bernstein said that "some of the non-OPEC supply cuts will
come from natural decline, but most will come from self-imposed
Saudi Aramco has told U.S. and European customers it will
reduce oil deliveries from January.
"The kingdom is targeting excess inventories, the lion's
share of which sit in the United States," said Virendra Chauhan,
oil analyst at Energy Aspects in Singapore. "Lower Saudi exports
to the U.S. could also make the export arbitrage uneconomic."
OPEC plans to slash output by 1.2 million bpd from Jan. 1,
with top exporter Saudi Arabia cutting around 486,000 bpd in a
bid to end overproduction that has dogged markets for two years.
On Saturday, producers from outside OPEC agreed to reduce
output by 558,000 bpd, short of the target of 600,000 bpd but
still the largest contribution by non-OPEC ever.
"Non-OPEC participation should add to bullish sentiment,"
Morgan Stanley said.
From outside OPEC, Russia said it would gradually cut
"Once cuts are implemented at the start of 2017, oil markets
will shift from surplus into deficit. Given the cuts in
production announced by OPEC, we expect that markets will move
into a 0.8 million bpd deficit in 1H17," AB Bernstein said.
But some analysts expect producers, drawn by higher oil
prices, to increase output again.
"There are too many moving parts for OPEC's new policy to be
sustainable in the long term. The strategy is bound to
overshoot, in our view. leading to lower prices in the second
half of next year," Barclays said in a note on Monday.
It forecast prices would fall from around $60 a barrel in
the second quarter to about $52 in the fourth quarter next year.
(Additional reporting by Florence Tan and Keith Wallis; Editing
by Richard Pullin)