Oil prices were little changed on Tuesday in light pre-New Year holiday trading with markets adopting a wait-and-see stance less than a week before the first output cut deal agreed between OPEC and non-OPEC members in 15 years is scheduled to kick in.
January 1 brings the official start of the deal agreed by the Organization of Petroleum Exporting Countries and non-OPEC members to lower production by almost 1.8 million barrels per day (bpd).
London Brent crude for February delivery was down 5 cents at $55.11 a barrel by 0732 GMT. The contract stood about 5 per cent below a 17-month high of $57.89 hit on December 12 after non-OPEC members agreed to make a concerted effort with OPEC to tame a global supply glut that has squeezed prices.
NYMEX crude for February delivery was up 6 cents at $53.08 a barrel, after closing at a 17-month high on Friday. Oil markets were closed on Monday after Christmas at the weekend.
“OPEC's output cuts are nearing, but because there's hardly any news on producers, the market is stuck in the doldrums," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
While major OPEC members led by Saudi Arabia, are set to cut output, Libya and Nigeria - exempt because armed conflict has curbed their output - have been increasing production recently, Akuta said.
Libya has boosted production by about 22,000 bpd from levels recorded before an armed faction agreed to lift a two-year blockade on major western pipelines, and it could add 270,000 bpd more within three months, the National Oil Corporation said.
“That raises concerns that despite the coordinated output cuts, the market may not tighten as much,” Akuta said.
Russia, in line with the OPEC deal, also committed itself to cutting its oil output by 300,000 bpd. But there are doubts whether Russian oil companies, with their own interests and plans, will hammer out a joint strategy to cut the country's production, which has reached a post-Soviet high.
Rosneft, which accounts for over 40 per cent of Russian oil production, said on Saturday its plans for next year allow it to be flexible with production volumes.
Meanwhile, Canada's oil sands prospects were buoyed by recent pipeline approvals, but news of two companies ditching local projects served as a reminder that industry confidence is still weak.
Elsewhere, China's industrial sector showed the strongest profit growth in three months in November, government data showed on Tuesday, though policymakers noted gains were too dependent on rebounding prices for oil products, iron and steel.