U.S. crude hits 3-year high as prices climb in tight market

* U.S crude hits $63.24/bbl, highest since December 2014

* OPEC-led output cuts, dip in U.S. inventories support

prices

* U.S. crude inventories seen lower for 8th straight week

* U.S. oil output to hit record over 11 mln bpd by end 2019

- EIA

* Iran says OPEC "not keen" on oil price rise

* Coming Up: API U.S. oil inventory data at 1630 EST (2130

GMT)

(New (KOSDAQ: 160550.KQ - news) throughout, updates prices and market activity to

settlement)

By Devika Krishna Kumar

NEW YORK, Jan 9 (Reuters) - Oil prices edged higher on

Tuesday, with U.S. crude touching its highest since December

2014, supported by OPEC-led production cuts and expectations

that U.S. crude inventories have dropped for an eighth week in a

row.

The Organization of the Petroleum Exporting Countries and

allies including Russia are keeping supply limits in place in

2018, a second year of restraint, to reduce a price-denting glut

of oil held in inventories.

U.S. West Texas Intermediate (WTI) crude rose $1.23,

or 2 percent, to settle at $62.96 a barrel after touching its

highest since December 2014 at $63.24.

Brent crude ended the session up $1.04, or 1.5

percent, at $68.82 per barrel after hitting a session high of

$69.08, its highest since May 2015. Both contracts had their

strongest close since December 2014.

"You're so long this market at this point, you could

certainly get more interest at these levels," said Rob Haworth,

senior investment strategist at U.S. Bank Wealth Management.

"This is a little more confirmation of what speculators have

been looking for and after tomorrow's (U.S. government

inventory) report, we'll see if they look to do some

profit-taking."

OPEC is cutting output by even more than it promised and the

restraint is reducing oil stocks globally, a trend most visible

in the United States, the world's largest and most transparent

oil market.

Supply reports this week from industry group the American

Petroleum Institute and the U.S. government's Energy Information

Administration are expected to show U.S. crude stocks fell 3.9

million barrels, an eighth week of decline.

The API releases its data at 4:30 p.m. EST (2130 GMT) on

Tuesday and the government report is due at 10:30 a.m. EST on

Wednesday.

"We expect oil demand growth to outpace non-OPEC supply

growth in both 2018 and 2019," Standard Chartered (BSE: 580001.BO - news) analysts said

in a note.

"In our view, the back of the Brent and WTI curves are both

still underpriced. We do not think that prices below $65 per

barrel are sustainable into the medium term."

Many producers, still suffering from a 2014 price collapse,

are enjoying the rally, although they are wary it will spur

rival supply sources. Iran said OPEC members were not keen on

increased prices.

The rise in prices is expected to drive gains in U.S.

production during 2018, offsetting curbs by others.

U.S. crude oil production is expected to surpass 10 million

barrels per day (bpd) next month, en route to an all-time record

months ahead of previous forecasts, the U.S. Energy Information

Administration said Tuesday.

Production was expected to rise to an average 10.04 million

bpd during the first quarter of this year.

Some analysts have said the rise in U.S. shale oil

production could discourage OPEC and Russia to maintain their

deal to curb supply until the end of the year for fears of

losing market share.

"I am now on the lookout for bearish technical patterns to

emerge on oil prices as I believe they will struggle to go north

of $65-$75 per barrel given the above fundamental

consideration," said Fawad Razaqzada, technical analyst for

Forex.com.

"If WTI were to go back below the 2017 high of $60.48, which

was hit late in the year, and the 2018's opening price of

$60.09, then the technical outlook would turn bearish on oil.

But for now, the bullish trend remains intact as prices remain

above key supports."

(Additional reporting by Alex Lawler in London, Henning

Gloystein in Singapore; editing by Marguerita Choy and David

Gregorio)