Investing.com - Oil prices rallied in the first trading session of 2017 on Tuesday, hitting the strongest levels since July 2015 on hopes OPEC’s deal to cut production that set in on Sunday will help stabilize the market in 2017.
Crude oil for February delivery on the New York Mercantile Exchange jumped to a session peak of $55.24 a barrel, a level not seen in 18 months. It was last at $54.93 by 10:25AM ET (15:25GMT), up $1.20, or around 2.25%.
Elsewhere, Brent oil for March delivery on the ICE Futures Exchange in London rallied $1.25, or 2.2%, to $58.08 a barrel, after touching a daily high of $58.38, the most since July 2015.
Oil markets were closed on Monday after the New Year's holiday.
January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.
The deal, if carried out as planned, should reduce global supply by about 2%.
However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.
There are also some worries in the market about production increases in Libya and Nigeria, which are both allowed to ramp up production as part of the OPEC deal.
Meanwhile, indications of increased drilling activity in the U.S. remained in focus. Oilfield services provider Baker Hughes said late Friday that the number of rigs drilling for oil in the U.S. last week increased by 2 to 525, the ninth straight weekly rise and a level not seen in almost a year.
Some analysts have warned that the recent rally in prices could be self-defeating, as it encourages U.S. shale producers to drill more, adding to concerns over a global supply glut.
Oil prices will gradually rise towards $60 per barrel by the end of 2017, a Reuters’ poll showed last week, with further upside capped by a strong dollar, a likely recovery in U.S. oil output and possible non-compliance by OPEC with agreed cuts.
Elsewhere on Nymex, gasoline futures for February added 1.15% to $1.692 a gallon, while February heating oil tacked on 0.9%, to $1.742 a gallon.
In contrast, natural gas futures for February delivery sank 27.4 cents, or 7.4%, to $3.450 per million British thermal units as forecasts for warmer weather and lighter heating demand through the first two weeks of January dragged down prices.