U.S. West Texas Intermediate (WTI) crude futures were at $54.04 a barrel, 11 cents below their last close but near their highest level since February and up around 28 percent since 2017-lows in June.
Traders said that bullish sentiment had driven Brent above $60 per barrel, fuelled by an effort led by the Organisation of the Petroleum Exporting Countries (OPEC) and Russia to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets and prop up prices.
The pact runs to March 2018, but Saudi Arabia and Russia have voiced support to extend the agreement. OPEC is scheduled to meet officially at its headquarters in Vienna, Austria, on November 30.
“Oil is higher again as the market, and sentiment moves in OPEC’s favour,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
“The fear of oversupply could easily turn to a fear of undersupply if inventories keep declining like they have been and demand continues to grow,” said William O’Loughlin, investment analyst at Rivkin Securities.
Despite the upbeat market sentiment, some analysts were cautious.
“U.S. shale output could keep a lid on prices over the medium to long-term,” said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.
WTI’s $6.8 per barrel discount to Brent is a result of rising American crude production , which is up almost 13 percent since mid-2016 to 9.5 million barrels per day (bpd), making U.S. crude exports highly profitable.
Also, not everybody within OPEC is withholding output with the discipline of the Saudis.
Iraq has increased exports from its southern oilfields to 3.45 million barrels per day (bpd) to make up for a shortfall from the northern Kirkuk fields, Basra Oil Company Director General Ihsan Abdul Jabbar told Reuters. Exports from Basra had previously averaged 3.23 million bpd.
State-owned Abu Dhabi National Oil Co (ADNOC) said last week it has cut the amount of oil supplies to its customers for December by reducing Murban grade by 15 percent, Das grade by 10 and Upper Zakum crude by 5 percent.
The Organization of the Petroleum Exporting Countries and allied non-OPEC producers including Russia cut output by about 1.8 million barrels per day from January 1, and extended the existing supply curb into March 2018.
Compliance with the cuts among OPEC and other oil producers were over 100 percent in the past couple of months, a rare level of commitment to supply curbs for the organisation.
The UAE’s compliance, however, has been lower because it is using its own, higher, output level as a reference point for its supply cut, rather than the supply baseline used in the agreement.