Brent crude oil prices rose above $55 a barrel on Monday, trading at a fresh 16-month high, on rising prospects of a tightening market after OPEC members agreed on a landmark deal to cut production last week.
Brent crude oil futures, the global benchmark used to trade oil, soared to their highest since July 2015 to $55.33 a barrel. WTI crude oil traded up 44 cents, or 0.8%, at $52.12 a barrel, Reuters reported.
Monday’s gains take the rally since the agreement was struck on Wednesday to 19% for Brent, the highest in almost eight years, and 16% for US crude.
“OPEC sentiment continues to support oil markets. Speculative short positions are still at elevated levels and as more traders unwind these positions they could trigger more support for oil prices,” said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
After members of the Organization of Petroleum Exporting Countries last week agreed to curb production by a combined 1.2 million barrels per day from January, all eyes have now turned to a meeting this weekend between OPEC and non-OPEC producers to expand the deal.
Non-OPEC producers are expected to agree to add an output cut of 600,000 barrels per day at a meeting in Vienna on Dec. 10.
Iran, which was granted an output rise as part of the OPEC deal as it recovers production curbed by sanctions, will also attend the meeting. However, one large uncertainty in the global supply balance is output from the United States, whose shale oil drillers proved more resilient than expected to weak oil prices.
US energy firms extended their recovery in oil drilling into a seventh month last week, data from energy services firm Baker Hughes showed on Friday.
Overall, accounting for the recent rise in oil drilling, but also for cutbacks earlier this year on low prices, Goldman Sachs said "year-on-year production will decline by 620,000 barrels per day in 2016 and increase by 55,000 bpd in 2017."
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