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Oil prices changed hands in a thin trading amid the pre-New Year holiday session on Tuesday, a week before the major international oil producers cut production relative with the deal they struck last month.  

Trading activity remained subdued as several market players had already made book disclosure before the year ends, which had reduced liquidity in the market.

February crude oil delivery on the New York Mercantile Exchange settled at 19 cents, or 0.36% to finish at $53.21 per barrel.

Meanwhile, March brent oil delivery on the ICE Futures Exchange in London remained steady at 4 cents, or 0.07% and stood at $55.94 per barrel.

Given the Christmas holiday, the oil market was closed on Monday.

OPEC members have agreed to cut output by a combined 1.2 million barrels a day, effective January 1, which had been their very first deal since 2008.

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Evidently, Russia has led the 11 non-OPEC producers who agreed on the deal to cut their supplies by 558,000 barrels a day, suggesting a total of nearly 1.8 million barrels a day.

However, it seemed that some traders remained cynical that the proposed cutting of supplies will be as significant as the market is expecting. Moreover, there are also some worries in the market over the rising production in the U.S. and Libya.

OPEC Starts Cutting Production

Oil prices rallied into a steady range of $50-60 a barrel after the Organization of the Petroleum Exporting Countries (OPEC) informed oil-producers to start cutting production in January.  

OPEC members agreed to cut production by 1.2 million barrels per day at the start of January and non-OPEC producers are to cut production by 600,000 barrels per day, citing two dozen countries are involved in the cuts.

Oil prices sharply declined by around 80% from mid-2014 through early 2016, to less than $30 a barrel. It seemed that most of the major world oil producers have agreed on the November 30th Vienna accord, including the OPEC and non-OPEC deal of December 10th.

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Oil Firms Closely Watch Retail Sales

Bharat Petroleum said that cashless transactions had skyrocketed to 26 percent over November 8 ahead of the banning of higher value notes, from an earlier reading of 10 percent and is expecting half of all transactions to turn cashless by March.

Retail sale of oil products such as petrol, diesel, CNG/PNG and LPG accounts for approximately 7.3 trillion transactions per annum in a volume basis, according to BPCL.

Conclusion

As oil prices continue to rally, market participants are recommended to still wait on the sidelines as there aren’t any supporting data as of writing.

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