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[NEW YORK] Oil gained 1.5 per cent Tuesday, continuing its year-end rally with support from expectations of tighter supply once the first output cut deal between Opec and non-Opec producers in 15 years takes effect on Sunday.
US crude prices have surged 25 per cent since mid-November, helped by expectations for Opec's supply cut and generally solid US economic figures that have also bolstered equity prices.
Trading was thin on Tuesday as just 257,000 front-month futures contracts traded, less than one-half of the usual volume in West Texas Intermediate crude futures. With oil near US$54 a barrel, US crude is not far from the year's high of US$54.51 high reached on Dec 12.
"Some of the doubts (in Opec) people are showing are going to have to be put to rest," said Phil Flynn, analyst at Price Futures Group in Chicago.
"There's a strong possibility that we're going to rally into the end of the year."
Jan 1 is the official start of the deal agreed by the Organization of Petroleum Exporting Countries and several non-Opec producers to lower production by almost 1.8 million barrels per day (bpd).
US crude settled up 88 US cents, or 1.7 per cent, to US$53.90 a barrel. Brent crude settled up 93 US cents, or 1.7 per cent, to US$56.09 a barrel. The global benchmark hit US$57.89 on Dec 12, highest since July 2015.
The members of an Opec and non-Opec committee formed to monitor the market may meet on Jan 13, two sources said. Oil rallied further after news of the meeting, which may give an early indication of compliance with the deal.
"From January, we'll start to have a better idea about the level of Opec production," said Olivier Jakob, oil analyst at Petromatrix.
Russian oil producer Gazprom Neft said on Tuesday it planned to increase oil production by 4.5 to 5 per cent next year, less than intended before Russia joined the supply cut deal.
Major Opec members such as Saudi Arabia and Iraq have informed customers of lower supplies. But Libya and Nigeria - which are exempt from reductions because conflict has curbed their output - have been increasing production.
Products markets outpaced crude on Tuesday, as the price of reformulated blendstock gasoline gained 1.8 per cent to US$1.6555 a gallon, while heating oil gained 2.3 per cent to trade at US$1.7002 a gallon. Those contracts expire Friday; options on those contracts are expiring Tuesday.