Investing.com – Crude oil prices settled at three-year highs on Friday as signs of growing US production was offset by ongoing optimism that OPEC-led output cuts would continue to drain the market of excess supplies.
On the New York Mercantile Exchange WTI crude futures for January delivery rose 54 cents to settle at $64.30 a barrel, while on London's Intercontinental Exchange, Brent gained 56 cents to trade at $83 a barrel.
The number of oil rigs operating in the U.S. rose by 10 to 752, its highest level in more than four months, according to data from energy services firm Baker Hughes.
The sharp uptick in US rigs drilling for oil did little to halt the rally in oil prices as investors remained optimistic that the bullish global economic growth would continue to fuel oil demand growth while major oil producers’ compliance with the deal to cut output would remain strong.
This comes as data earlier this week showed US crude oil production dropped by the most since October as the “bomb cyclone” winter storm has disrupted output.
That said, however, the steep run-up in oil prices above three-year highs has led some to question whether the current rally is on borrowed time.
“It is premature to expect further upside to be sustainable, at least until the market gains a better grasp of the pace of U.S. production growth,” said Michael Tran, a commodities strategist with RBC Capital Markets.
The four-week rally in crude prices comes as investors mulled over president Donald Trump’s decision to extend sanctions relief temporarily for Iran, keeping the Obama nuclear deal alive, dampening the prospect of a reduction in global supplies.
Ahead of Trump’s decision on the Iranian nuclear deal, some market participants were of the view that an end to sanctions relief for Iran would slashed the country’s oil exports significantly, ridding the market of excess supplies, extending the oil rally.