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[NEW YORK] Oil prices rose more than 2 per cent on Friday on expectations that this weekend's meeting of the world's top oil producers would demonstrate compliance to a global output cut deal, but rising US drilling activity limited gains.
Members of the Organization of the Petroleum Exporting Countries and some other producing countries including Russia will meet in Vienna this weekend to establish a mechanism to verify compliance with a deal to cut 1.8 million barrels per day (bpd) of output, Opec's secretary general told Reuters.
Saudi Arabia's energy minister said 1.5 million bpd had already been taken out of the market.
"The petroleum markets are moving higher in Friday trade on the latest round of positive talk about how much supply oil producers have taken offline ahead of Sunday's review by Opec and non-Opec representatives in Vienna," Tim Evans, Citi Futures' energy futures specialist, said in a note.
Brent crude ended the session up US$1.33, or 2.5 per cent, at US$55.49 a barrel. US crude for February delivery closed up by US$1.05, or 2 per cent, at US$52.42 a barrel before expiring. The more active March contract settled up 2.1 per cent at US$53.22.
For the week, both contracts were largely unchanged.
Prices pared gains after data from energy services firm Baker Hughes showed US drilling companies this week added the most oil rigs in nearly four years.
Swelling oil stockpiles in the US and rising shale production could threaten market rebalancing, analysts said.
"For a lasting balance to be restored on the oil market and the very high stocks reduced, the agreement will need to be strictly implemented over a considerable period of time," Commerzbank said in a note.
"This is particularly true given that US oil production is rising again and given that the oil supply from Libya and Nigeria may be expanded."
US crude inventories unexpectedly soared 2.3 million barrels last week as refineries sharply slowed production, while gasoline builds were much larger than expected amid weak demand, the Energy Information Administration said on Thursday.
Hedge funds rushed to place bullish wagers on US crude oil in the week to Jan 17, boosting their net long positions to the highest levels since July 2014, data from the US Commodity Futures Trading Commission (CFTC) showed.
Gross long positions in NYMEX futures and options among speculators soared to the highest on record, based on publicly available data going back to 2006.
Libya's National Oil Corporation (NOC), meanwhile, said production had now climbed to 722,000 bpd, resuming its rise after poor weather had caused a small dip.
Bjarne Schieldrop, chief commodities analyst at SEB Markets, said Brent crude was starting to move into a trading range around US$55 as the production cut deal placed a floor price of US$50, while US shale oil producers capped the upside at US$60.