By Alison Sider and Christopher Alessi
Oil prices pressed higher Friday, with Brent crude topping the elusive $60-a-barrel mark for the first time in more than two years amid hopes that OPEC will continue curbing output.
Brent, the global benchmark, rose $1.14, or 1.92%, to $60.44 -- its highest settlement value since July 2, 2015. U.S. crude futures rose $1.26, or 2.39%, to $53.90 a barrel -- an eight-month high.
The $60 threshold is one that oil producing nations and bullish investors have been eyeing all year. They've often been frustrated: despite production cuts by the Organization of the Petroleum Exporting Countries and other major exporters, rallies have been fleeting.
But the outlook has shifted in recent weeks, with oil prices posting weekly gains three weeks in a row. Brent prices rose 4.66% this week and West Texas Intermediate, the U.S. benchmark, rose 3.97%.
"It's been a slow train coming," said Mark Benigno, co-director of energy trading at INTL FCStone, but investors have come around to the idea that OPEC's efforts are paying off. "People wrote off the story like, 'forget OPEC.' But it's happening the way they were hoping it would," Mr. Benigno said.
Crude and fuel stockpiles have declined steadily, and demand is growing. Saudi Arabia and Russia have thrown their support behind extending production cuts through the end of 2018. Near-term Brent prices are higher than prices for oil delivered in future months, a market structure that indicates tighter supplies available for immediate delivery.
"That's telling me this is happening -- this is working," said Michael Hiley, a trader at LPS Futures LLC. "The underlying fundamentals keep nudging us higher."
Rising geopolitical risk has also boosted oil prices lately. Clashes between Iraqi government troops and forces from the semiautonomous Kurdish region disrupted some oil production and exports this month.
Some expect oil to encounter staunch resistance on its march higher. U.S. oil producers are likely to take advantage of the rally to hedge, or lock in higher prices for output next year.
"It can't really go above $60" a barrel, Giovanni Staunovo, a commodity analyst at UBS Wealth Management, said of the price of Brent. "If it goes too high, it is an indication to U.S. shale producers to produce more oil," a development that could undermine the oil market rebalancing under way, he said.
Mr. Staunovo said UBS expects the price of Brent to stay in a range of $55 to $60 a barrel.
OPEC and some major producers outside the cartel, including Russia, first agreed late last year to cap their production at around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices. The deal has already been extended through March 2018, but many market participants are now anticipating that it will be pushed even further out, something Saudi Arabia and Russia -- the world's two largest crude producers, favor, people familiar with the matter said earlier this week.
OPEC and Russia are set to formally discuss an extension of the deal at the cartel's next official meeting in Vienna on Nov. 30.
Gasoline futures rose 1.8 cents, or 1.03%, to $1.7686 a gallon. Diesel futures rose 2.5 cents, or 1.36%, to $1.8669 a gallon -- its highest settle value since June 30, 2015.
Write to Alison Sider at [email protected] and Christopher Alessi at [email protected]