The US Oil rallied back to $53.41 highs, after posting $52.19 lows on Monday. Stronger China production and retail sales data helped oil sentiment, though it was an IEA report that took the contract to session highs. The agency estimated global oil supply would turn to a deficit in the first half of 2017, if OPEC/non-OPEC producers adhered to agreed on output cuts. OPEC is set to cut by 1.2 mln bpd, with non-OPEC pledging nearly 600k bpd. In November, OPEC pumped at a record pace, estimated at 34.2 mln bpd, and up from around 33.0 mln bpd in January of 2016. In effect, the agreed upon cuts, do nothing more than to bring OPEC production back to early 2016 levels. U.S. production has slipped some over the course of the year, but with prices back over $50/bbl, shale output can be expected to ramp up in the coming months, with potential to offset any OPEC output cuts. Additionally, Abu Dhabi gave notice to customers that it is trimming output by 5% at two of its oil fields, and by 3% at another. Kuwait also notified that it will be reducing production from January. Following the agreement of OPEC and other oil producers, market participants will be wanting to see strong compliance during the crucial implementation phase, which will commence from January 1.
US Oil remains bullish following support holding over $49.20 and the break of the $51.85 triple top. Mondays (December 12) $54.40 is the next resistance and then Target 1 $56.00 and Target 2 $62.00.
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