NEW YORK, Jan. 11 (UPI) -- After steep losses, efforts from Saudi Arabia to broadcast compliance with a production cut deal gave crude oil prices a lift early Wednesday.
Crude oil prices lost ground quickly Tuesday after a report from the U.S. Energy Information Administration forecast a rise in domestic crude oil production in 2017, after previous estimates predicted a decline.
Last year's decline in crude oil prices made it cost-prohibitive to work in some U.S. shale oil basins, though market recovery in the wake of a November decision from the Organization of Petroleum Exporting Countries to limit production made it more favorable for some operators to return to work.
"The change in the current forecast reflects crude oil prices that have been higher than forecast in recent months, allowing producers to increase active rigs at a faster pace than expected," the EIA's report read.
The year started with crude oil prices hitting 18-month highs on expectations that parties to the OPEC deal would make good on their word. According to a report in Bloomberg, Saudi Arabia, the lead oil producer in OPEC, countered the supply-side pressures from the United States by limiting crude oil sales to the Asian market starting in February. That could influence supply and demand factors in China, the world's second-largest economy.
After heavy losses in the previous session, Brent crude oil prices were staged for recovery, moving up 0.8 percent to $54.09 per barrel in the hour before trading began in New York. West Texas Intermediate, the U.S. benchmark price for oil, was up 0.6 percent to $51.14 per barrel before the open.
Traders later in the week may react quickly to any variances in U.S. crude oil stockpiles, as large gains in inventory levels would indicate pressures from oversupply are re-emerging. A decision to sell oil from the Strategic Petroleum Reserve during the first quarter may also cause some knee-jerk market reactions moving forward.
Longer term, Olivier Jakob, managing director of Switzerland-based consultant Petromatrix, said in an emailed report the focus will be on whether parties to the OPEC agreement are holding up their end of the collective bargain.
"Crude oil is starting to eat into the OPEC meeting price-premium and that will be a wake-up call in different oil ministries to issue more statements about compliance," he said.