Oil edges up to near 2-year highs as market tightens

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On Wednesday, Brent reached $61.70, its highest intraday level since July 2015.

The West Texas Intermediate for December delivery increased 0.24 USA dollar to settle at 54.54 dollars a barrel on the New York Mercantile Exchange, while Brent crude for January delivery added 0.13 dollar to close at 60.62 dollars a barrel on the London ICE Futures Exchange.

Confidence has been fueled by an effort this year lead by the Organization of the Petroleum Exporting Countries and Russian Federation to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets.

"Compliance as a whole for Opec up being rather strong", said Mark Watkins, regional investment manager at US Bank.

Overall, oil markets have been slightly under-supplied this year, resulting in inventory drawdowns. "Now that we've flipped the calendar to November we have the OPEC meeting at the end of the month".

US crude inventories fell by roughly in the week ended October 27, a steeper decline than the 1.8 million barrels expected.

Brent prices broke above $60 a barrel last week for the first time since July 2015, supported by expectations that an agreement to cut output between the Organization of the Petroleum Exporting Countries and other major producers including Russian Federation would be extended beyond its current time frame of March 2018. Both said the ministers were expected to give a briefing.

Benchmark crude futures were building on the previous session's gains as Wednesday's trading got underway in Asia, after the American Petroleum Institute reported major declines in U.S. crude as well as gasoline and distillate inventories for the week ended October 27.

That said, Goldman Sachs (NYSE:GS) analysts expect year-on-year United States oil production to grow by 0.8 million to 0.9 million barrels per at year-end 2017.

The uptick in production overshadowed a mixed report from the Energy Information Administration showing crude and gasoline stockpiles declined more than expected, while distillate fell less-than-expected. This would put end-2017 output at 9.6-million to 9.7-million bpd, close to its highest for at least three decades.

USA independent oil producer Pioneer Natural Resources said it expected to export 2.3 million barrels of oil in the fourth quarter.

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