By Jenny W. Hsu 
 

U.S. crude futures saw moderate gains in early Asian trade Tuesday, buoyed by optimism that the gap between supply and demand is narrowing thanks to a concerted production cut effort by major producers.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $52.47 a barrel at 0201 GMT, up $0.10 in the Globex electronic session. March Brent crude on London's ICE Futures exchange fell $0.14 to $55.72 a barrel. Markets in the U.S. were closed Monday for a public holiday.

Oil prices rose overnight after Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries touted the effect of the production cut pact. According to media reports, Saudi oil minister Khalid Al-Falih told reporters at an energy event in the United Arab Emirates that the market will be rebalanced by the end of the first half of the year.

OCBC said that Mr. Ah-Falih's views, if supported by the market, could spur another oil rally before mid-year.

OPEC and 11 other oil producers, including Russia, last year agreed to cut their combined production by 1.8 million barrels a day, equivalent to almost 2% of the global daily production. The cuts took effect this month and will expire in six months with an option to extend it by another six months, if deemed necessary.

According to a Bloomberg report, Mr. Al-Falih said he doesn't see the need to extend the cuts because he doesn't want to leave the market in a shortage when demand rises in the summer months.

OPEC has set up a committee to keep a tab on signatories' production growth. The committee will meet later this week for the first time.

Analysts at BMI Research, however, warn that if findings by the committee don't meet market expectations, Brent prices could face strong headwinds. The firm pointed out that many investors have amassed bullish positions in Brent futures and options, with ratio of longs to shorts reaching 11 to 5 in early January.

Investors usually take more long positions if they expect their investment to appreciate.

"Given that current speculative positioning is heavily bullish, the balance of risk lies mainly to the downside," the firm says.

In the near term, investors will be combing through OPEC's monthly production report slated for publication later today. The report will only contain the December figures, but analysts will be searching for any early clues or comments on the production cut agreement.

Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--rose 73 points to $1.6190 a gallon, while February diesel traded at $1.6620, 106 points higher.

ICE gasoil for February changed hands at $489.50 a metric ton, up $2.50 from Monday's settlement.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

January 16, 2017 22:36 ET (03:36 GMT)

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