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Oil hits three-week high as glut shrinks faster than expected

[NEW YORK] Crude advanced to a three-week high as the Opec-led alliance of major oil producers accelerated the timeline for curbing a worldwide supply glut.

Futures in New York climbed as much as 2.4 per cent on Tuesday. Global crude supplies will come into balance with demand by the end of September, sooner than previous forecasts, according to the special committee appointed by the Opec-led group to oversee their historic accord. Concerns that President Donald Trump may toughen sanctions against Iran - Opec's No 3 producer - also fanned the rally.

The Opec-allied nations are "pretty much sticking to their guns and they continue to say they are in it until the oversupply is done," said Bart Melek, head of global commodity strategy at TD Securities in Toronto, said.

Crude in New York has advanced more than 5 per cent this year as the oversupply that crushed prices in the 2014-2016 slump began to drain. Record high US crude production coupled with mounting levels of stored supplies in American tanks and terminals forestalled any price breakouts. UBS Group AG said it maintains a negative view on prices because of near-term builds in inventories.

"The oil market is in reasonably good health," said Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen. "Oil is settling into a wide range between US$60 and US$70. Storm clouds could emerge if global demand growth begins to be called into question."

West Texas Intermediate for April delivery, which expires Tuesday, advanced US$1.54 to US$63.60 a barrel at 11.10am on the New York Mercantile Exchange, the highest intraday level since Feb 27. The more-active May futures contract rose US$1.20 to US$63.33.

Brent for May settlement surged US$1.26 to US$67.31 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$3.98 premium to WTI for the same month.

The special committee established to monitor compliance by the nations aligned with Saudi Arabia and Russia to curb supplies said its timeline assumes Libya and Nigeria keep output at February levels and other participants in the deal maintain full adherence, according to the people familiar with the matter who weren't authorised to discuss it publicly.

In the US, crude stockpiles probably expanded by 3.2 million barrels last week, according to a Bloomberg survey ahead of a government report scheduled to be released on Wednesday. Inventories held at the key Cushing, Oklahoma, pipeline hub probably rose by 200,000 barrels last week, a forecast compiled by Bloomberg shows.

The industry-funded American Petroleum Institute will release its weekly inventories data later on Tuesday.

Other oil-market news: Gasoline futures rose 2.3 per cent to US$1.9697 a gallon on Tuesday.

Ian Taylor, the legendary oil trader who stepped down as chief executive officer of Vitol Group this month to become chairman, is seeking joint ventures and long-term structured deals with some of the Middle East's largest oil-producing nations.

Oil explorers will show this week whether their appetite for offshore drilling has returned after years of focusing mostly on land-based shale fields like the US Permian Basin.