London- Oil prices were down on Friday, but were still on track for their biggest annual gain since 2009 after the Organization of the Petroleum Exporting Countries (OPEC) and other major producers agreed to cut output to reduce a global supply overhang that has depressed prices for two years.
US benchmark West Texas Intermediate (WTI) crude futures were down 25 cents at $53.52 a barrel by 9:38 a.m. EST (1438 GMT) on Friday, while Brent fell 26 cents to $56.59.
Brent has risen about 50 percent this year and WTI has climbed around 43 percent, the largest annual gains since 2009, when Brent and WTI rose 78 percent and 71 percent respectively.
Oil prices have more than halved since the summer of 2014, when it was above $100 a barrel. But a new agreement to reduce production by the OPEC, struck over three months from September this year, marks a return to the 13-country group's old objective of defending prices.
Oman told some customers it would reduce term allocations by 5 percent in March, but did not say whether the supply reduction would continue after that.
Although doubts remain as to the production cuts' effectiveness in implementation, the rise in prices can be seen as "proof of international credibility," for OPEC and partners, said Igor Yusufov, founder of the Fund Energy investment firm and a former Russian energy minister. Equally as important to oil prices next year will be the development of demand globally, and major forecasters diverge in their predictions.
"We see a big variation in demand growth assessments for 2017, ranging from +1.22 million bpd (barrels per day) ... to +1.57 million b/d," analysts at JBC said in a note to clients.
"Overall, all forecasters agree that Asia will remain the main engine for demand growth."
Oil will gradually rise toward $60 per barrel by the end of 2017, a Reuters poll showed on Thursday, with further upside capped by a strong dollar, a likely recovery in US oil output, and possible non-compliance with agreed cuts.
The market on Friday shrugged off an unexpected increase in US crude inventories, which rose 614,000 barrels in the week to Dec. 23 according to US Energy Information Administration data. Analysts had expected a decrease of 2.1 million barrels.
-Reuters