By Nigar Abbasova
Oil prices increased on January 12, supported by expectations of a strong demand growth in China and signs that OPEC members are starting to cut output. However, the problem of rising U.S. crude inventories and plentiful global supplies is still looming over the market.
Brent crude futures were trading at $55.29 a barrel, some 19 cents up from their last close, while U.S. West Texas Intermediate (WTI) stood at $52.29 a barrel recording an increase of 4 cents, Reuters reported.
The increase was triggered by record Chinese car sales, which grew 13.7 percent between 2015 and 2016 to a total of 28 million sold vehicles.
The rising vehicle sales expectations in the world's largest auto market boosted oil futures regardless forecasts on slow demand growth for products like gasoline and diesel.
China National Petroleum Corporation (CNPC) said that its crude imports will rise 5.3 percent to 396 million tons (around 8 million barrels per day) in 2017, given China's growing fuel consumption. Total crude demand is expected to hit a record 594 million tons this year (around 12 million bpd).
A supportive sign also came from Saudi Arabia, the cartel’s top exporter, which cut February term crude supplies to refiners in India and Southeast Asia, seeking to comply with an OPEC deal. The cuts falling to a share of the Kingdom are expected to be mainly focused on Europe and the United States as the exporter targets excess inventories.
Also, Iraq, one of the cartel members, announced about decreasing its production by 160,000 bpd since the beginning of January, while the output is expected to be cut by 210,000 bpd by the end of the month.
Traders assessed crude oil inventory report published by the U.S. Energy Information Administration became a dragging force for the prices. Inventories unexpectedly rose by 4.1 million barrels to 483.11 million barrel.
However, record U.S. refinery activity of some 17.1 million barrels per day (bpd), up 418,000 bpd on the week, indicated strong demand, preventing bigger price falls.