Oil prices advanced to a fresh two-year high Friday, buoyed by expectations for OPEC to extend its deal to cut production and the steady reduction of excess U.S. supply.
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Light, sweet crude for December delivery gained $1.10, or 2%, to $55.64 a barrel on the New York Mercantile Exchange, the highest level since July 2015. Brent, the global benchmark, also rose to another two-year high, settling up $1.45, or 2.4%, to $62.07 a barrel.
The oil market has rallied as investors have been reassured by a decline in crude inventories and strong rhetoric from Saudi Arabia supporting the deal among the Organization of the Petroleum Exporting Countries and other major producers to stick with supply cuts.
Last year, OPEC, along with several other countries including Russia, agreed to cut production by 1.8 million barrels a day to alleviate the global overhang of crude that dragged down prices. Traders are looking ahead to the cartel's official meeting in Vienna on Nov. 30, to see if producers extend the deal beyond March 2018.
"I think the prices are already reflecting an extension of the OPEC deal, " said Tariq Zahir, managing member of Tyche Capital Advisors. For now "it's kind of a wait-and-see game."
Prices have also gotten a boost from data showing that the amount of crude oil in storage has fallen in recent weeks. On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 2.4 million barrels in the week ended Oct. 27, extending a trend.
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"U.S. inventories are in a destocking mode," said Dominick Chirichella, an analyst at the Energy Management Institute. "That's very encouraging."
Mr. Chirichella added that geopolitical risk has heightened this year, giving rise to concerns of a disruption in oil supply.
"Geopolitical risk is back in the picture in a very clear way," said Richard Mallinson, an analyst at consultancy Energy Aspects, citing conflict in northern Iraq and Venezuelan financial instability.
Iraqi troops have in recent weeks clashed with forces from semiautonomous Kurdistan, disrupting crude production and exports from the northern, oil-rich region. The conflict was ignited when the Kurds in late September voted nearly unanimously to secede from Baghdad in a controversial independence referendum.
Mr. Mallinson estimated that approximately 300,000 barrels a day of Iraqi production are currently offline.
Meanwhile, Venezuela said Thursday it would seek to restructure its debt. But if the country were to default, the economic fallout would likely engulf the state-owned oil company, Petróleos de Venezuela SA. That could potentially lead to a disruption in oil flows, reducing global supply, according to Mr. Mallinson.
Gasoline futures rose 1.3% to $1.7934 a gallon and diesel futures rose 1.8% to $1.8866 a gallon.
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(END) Dow Jones Newswires
November 03, 2017 16:47 ET (20:47 GMT)