Oil prices continued to hit new multimonth highs Tuesday as a lower-than-expected U.S. production figure helped breathe new life into a recent rally.
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U.S. crude futures rose for a fourth straight day, gaining 23 cents, or 0.41%, to $54.38 a barrel on the New York Mercantile Exchange -- the highest since February. Brent, the global benchmark, rose 47 cents, or 0.77%, to $61.37 a barrel on ICE Futures Europe, hitting another one year high.
Oil prices have surged this month, with Brent rising around 8% in the past four weeks to a more-than-two-year high on Monday, supported by increased talk that members of the Organization of the Petroleum Exporting Countries and other producers including Russia would extend production cuts beyond the current end date of March 2018.
On Tuesday, prices got a jolt after the U.S. Energy Information Administration reported that U.S. crude output edged down in August, falling slightly to 9.203 million barrels a day from 9.234 million barrels a day in July.
The final August figure was lower than what the EIA's weekly data would have predicted, indicating that U.S. producers haven't been pumping as much oil as some thought.
"This just reinforces to a lot of people in the market that the weekly data can't necessarily be taken at face value. That's supportive," said John Kilduff, founding partner at Again Capital.
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And analysts are anticipating that data due Wednesday will show that crude oil stockpiles resumed their declines last week. Analysts and traders surveyed by The Wall Street Journal forecast that U.S. crude inventories fell by 1.2 million barrels last week, on average, and anticipated declines in gasoline and diesel supplies.
"If that's the case, I think $55 oil could become history, and we could march on to $60," said Peter Cardillo, chief market strategist at First Standard Financial. "The key is a unified OPEC, and demand remaining strong and probably increasing."
Tom Pugh, commodities economist at Capital Economics, said the latest push higher was driven by Saudi crown prince Mohammed bin Salman's commitment, made over the weekend, to extend the OPEC production cut agreement with Russia until the end of 2018.
"The new base case is that they will roll over the current cuts to the end of next year," said Mr. Pugh, adding that a failure to follow through on this would see prices fall.
OPEC is due to meet Nov. 30 to discuss the output cuts which were implemented in January in an attempt to accelerate the draining of global stocks after more than three years of surplus supplies. Some analysts warn that even if the meeting's outcome is an extension to the cuts, the market could pull back.
"In case the supply cut deal is confirmed at the end of November oil bulls could also decide the time has come to take profit," said Tamas Varga, analyst at brokerage PVM.
While both global and U.S. crude futures have surged, Brent has pulled ahead of the U.S. benchmark. While global inventories have tightened, there is still a surplus of oil in U.S. storage tanks, and the prospect that shale producers will ramp up is also looming over U.S. prices.
Bullish bets on Brent contracts have outpaced those on West Texas Intermediate, the U.S. benchmark, as "money managers have preferred to concentrate optimism in Brent contracts," analysts at JBC Energy wrote in a client note.
"This may to some extent be a function of the persistent WTI price discount and broader fears about the ability of U.S. crude supply to rise in line with prices, on top of Brent's generally higher sensitivity to geopolitics."
Gasoline futures rose 1.55 cents, or 0.88% to $1.7796 a gallon. Diesel futures rose 0.68 cent, or 0.36%, to $1.8845 a gallon.
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(END) Dow Jones Newswires
October 31, 2017 15:36 ET (19:36 GMT)