Oil prices hit a two year high Thursday amid growing optimism that the oil glut is shrinking.
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U.S. crude futures rose 24 cents, or 0.44%, to $54.54 a barrel -- the highest since July 2, 2015. The U.S. benchmark has gained in 15 of the past 19 sessions.
Brent, the global benchmark, rose 13 cents, or 0.21%, to $60.62 a barrel on ICE Futures Europe.
Brent prices broke above $60 a barrel last week for the first time since July 2015, supported by expectations that an agreement to cut output between the Organization of the Petroleum Exporting Countries and other major producers including Russia would be extended beyond its current time frame of March 2018.
Analysts said oil remained underpinned by falling U.S. stocks, which is helping to drain the buildup of global inventory, accumulated over several years of surplus supply. The U.S. Energy Information Administration published data on Wednesday showing crude stockpiles fell by 2.4 million barrels in the week ended Oct. 27.
Stronger than expected demand as well as reduced supplies have converged to lift prices in recent weeks, analysts said.
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"On a global basis, better than expected oil demand is likely developing off of strong world economies," Jim Ritterbusch, president of Ritterbusch & Associates, wrote in a research note. "This demand strength is crisscrossing against continued downsized OPEC production where compliance to this year's agreement remains much stronger than generally expected."
Still, the rally may be slowing as market participants wait to see whether OPEC will extend its cuts when it meets Nov. 30.
"The market is taking a breath here," said Andy Lipow, president of Lipow Oil Associates. Mr. Lipow said he is sticking with his calls for Brent to hit $60 and for West Texas Intermediate, the U.S. Benchmark, to reach $55 a barrel for now.
"I'm going to wait a little bit and look around and see what's going to happen with inventories and demand over the next several weeks," he said.
Rising U.S. output could hinder efforts to rebalance supply and demand however, while also eating into OPEC members' market share. U.S. exports hit a record level of more than 2 million barrels a day in the week ended Oct. 27, according to EIA data.
"As OPEC considers a full extension of its production cut deal, U.S. crude will likely make inroads into traditional OPEC markets that will be difficult to reverse," Emirates NBD Bank said in a note.
But other analysts say global demand is strong enough to absorb the extra output from the U.S.
"In our view, the market should not be concerned about elevated U.S. exports," analysts at Energy Aspects wrote in a research note. "Brent at $60 is undoubtedly justified."
Gasoline futures rose 2.87 cents, or 1.65%, to $1.7697 a gallon. Diesel futures fell 0.86 cent, or 0.46%, to $1.8539 a gallon.
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(END) Dow Jones Newswires
November 02, 2017 17:32 ET (21:32 GMT)