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Oil Prices Rise as Middle East Producers Stick to Supply Cuts

Kuwait and Qatar have notified customers of supply cuts for Jan.Kuwait and Qatar have notified customers of supply cuts for Jan.

Oil prices rose on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters.

International benchmark crude Brent traded up 51 cents at $56.20 a barrel, while West Texas Intermediate futures were up 39 cents $53.22, Reuters reported.

In a sign that producers are acting on their plans to cut output, Abu Dhabi National Oil Co. told customers it would reduce Murban and Upper Zakum crude supplies by 5% and Das crude exports by 3%.

Kuwait Petroleum Corp notified customers of a cut in contractual crude supplies for January, as did Qatar Petroleum.

But traders said the market was pressured by investors closing financial positions that profited from strong gains the day before.

Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week following a deal reached by the Middle East-led Organization of Petroleum Exporting Countries and other exporters led by Russia to cut output by almost 1.8 million barrels per day.

However, analysts warned prices would turn fast if the market believed compliance was lacking.

"The plan was designed on Nov. 30. The foundation was laid down on Dec. 10. The construction will start on Jan. 1. The following three to six months will provide us with an answer as to whether the foundation is strong enough to hold the building or will it collapse like a house of cards," PVM analysts wrote.

Meanwhile, China's November crude output fell 9% from a year earlier to 3.915 million bpd, data showed on Tuesday. Production recovered from October's 3.78 million bpd, however, which was the lowest in more than seven years.

China's refinery throughput hit a record in November of 11.14 million bpd, up 3.4 percent year-on-year.

"Declines in Chinese ... crude oil output and expansion of its strategic crude reserves underpin our view for China's crude oil imports to strengthen," BMI Research said.

 

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