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US crude settled above $54 a barrel for the first time this year amid optimism that Opec will be successful in easing a global supply glut.
West Texas Intermediate rose 1.24 per cent on Tuesday to $54.06, while Brent crude oil settled 0.94 per cent higher to $56.71.
The advance came as Citigroup raised its short-term price outlook on strong Opec compliance with its output-cut agreement and growing demand in Asia.
Citigroup said the WTI benchmark may average $53 per barrel in the first quarter and $54 per barrel in the second quarter, while it raised its estimates for Brent crude to $55 and $56 per barrel in the first quarters of the year.
Earlier in the day, Opec’s secretary general said he predicted greater compliance with a global supply deal to stabilise oil prices, even as he said there were “teething” issues in ensuring full cooperation from producers outside the cartel.
US oil markets are expected to “tighten in line with global fundamentals” as the flow from the Middle East falls, according to Standard Chartered analysts.
That would come as bullish news since the average daily inventory build-up of 980,000 barrels so far this year is far above the first quarter average going back the past decade of 430,000 barrels, the analysts note.
“The key questions are whether this rate will be sustained through the rest of Q1, and whether it is indicative of a global surplus or simply a US imbalance,” Standard Chartered analysts wrote. “We think it is unsustainable.”