Oil tops $55 for 1st time in 16 months as OPEC deal fuels buying

Brent crude oil prices rose above USD 55 a barrel on Monday, trading at a fresh 16-month high, on rising prospects of a tightening market after OPEC members agreed on a landmark deal to cut production last week.
Monday's gains take the rally since the agreement was struck on Wednesday to 19 percent for Brent, the highest in almost eight years, and 16 percent for US crude.

Brent crude oil futures, the global benchmark used to trade oil, soared to their highest since July 2015 to USD 55.33 a barrel. It last traded at USD55.05 a barrel, up 59 cents, or 1.1 percent, at 1133 GMT.

WTI crude oil traded up 44 cents, or 0.8 percent, at USD 52.12 a barrel.

"OPEC sentiment continues to support oil markets. Speculative short positions are still at elevated levels and as more traders unwind these positions they could trigger more support for oil prices," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

After members of the Organization of the Petroleum Exporting Countries last week agreed to curb production by a combined 1.2 million barrels per day (bpd) from January, all eyes have now turned to a meeting this weekend between OPEC and non-OPEC producers to expand the deal.

Non-OPEC producers are expected to agree to add an output cut of 600,000 barrels per day (bpd) at a meeting in Vienna on Dec. 10.

Iran, which was granted an output rise as part of the OPEC deal as it recovers production curbed by sanctions, will also attend the meeting, SHANA news agency said on Monday.

However, one large uncertainty in the global supply balance is output from the United States, whose shale oil drillers proved more resilient than expected to weak oil prices.

US energy firms extended their recovery in oil drilling into a seventh month last week, data from energy services firm Baker Hughes showed on Friday.

Overall, accounting for the recent rise in oil drilling, but also for cutbacks earlier this year on low prices, Goldman Sachs said "year-on-year production will decline by 620,000 barrels per day (bpd) in 2016 and increase by 55,000 bpd in 2017".