Oil hits US$56 a barrel on signs Russia, OPEC delivering cuts

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LONDON (Feb 1): Oil rose to around US$56 a barrel, supported by signs that Russia and OPEC producers are delivering on promised supply reductions, although a report showing a large rise in US crude inventories curbed Wednesday's gains.

Russia has cut production in January by around 100,000 barrels per day (bpd), according to data provided to Reuters on Wednesday. A day earlier, a Reuters survey found high compliance by OPEC with agreed cuts.

Brent crude was up 50 US cents at US$56.08 a barrel at 1441 GMT, having risen as high as US$56.24. US crude rose 41 US cents to US$53.22.

The producer efforts were countered by signs of a persistent supply glut in the United States. US crude inventories rose by 5.8 million barrels, industry group the American Petroleum Institute said on Tuesday, more than analysts forecast.

"The oil complex remains firmly stuck in its narrow range after the API reported an unrelenting increase in bulging US petroleum stockpiles," Stephen Brennock of oil brokers PVM said.

"Any hopes of a sustained recovery in price will depend on increasing efforts by OPEC to curb output though the prospect of an upside breakout will be undermined by the budding revival in US crude production."

Following on from Tuesday's API report, the US government's official inventory figures are due later on Wednesday. Analysts expect crude stocks to rise by 3.3 million barrels.

The cuts by Russia and the Organization of the Petroleum Exporting Countries follow last year's agreement to lower supplies by a combined 1.8 million bpd, to prop up prices which are still half their level of mid-2014.

A Russian cut of 100,000 bpd would be a third of Moscow's pledge to reduce its output by 300,000 bpd. However, Russia has said that its planned output reduction would be gradual.

OPEC has implemented most of its reduction. A Reuters survey on Tuesday found that OPEC members in January have delivered on about 82% of their deal to lower supply by 1.16 million bpd.

"With data now coming out for the first month affected by the OPEC and non-OPEC output cuts, it appears fairly safe to say that compliance with the pledged reduction has been relatively high," analysts at JBC Energy said in a report.

JBC estimates OPEC delivered on 88% of its pledged reduction. Petro-Logistics, a company which tracks OPEC supply, also estimates compliance has been high.