Oil hits highs as Opec members calls for output curbs to continue

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Oil hovered near a three-year high above $70 a barrel on Monday on signs that production cuts by OPEC and Russian Federation are tightening supplies, although analysts warned of "red flags" due to surging US production.

According to the U.S. Energy Information Administration, U.S. crude inventories fell 4.9 million barrels last week, more than the 3.9-million decline forecast.

Speaking in an industry conference held in UAE's Abu Dhabi, Luaibi said: "The market now is not 100 percent stable", adding that the current oil prices could be sustained, but there might be some fluctuations.

The agreement between the Organization of the Petroleum Exporting Countries and a group of non-OPEC producers led by Russian Federation reached in late 2016, to cut 1.8 million barrels of crude daily (MMBPD), is slated to run through the end of 2018.

On the demand side of the price equation, the current cold snap in the U.S. has seen the countries refineries crank up production of distilates that include heating oil used in many United States homes.

Iraq's oil output capacity is nearing 5 million barrels per day (bpd), but the country will remain in full compliance with its output target under a global pact to cut supplies, oil minister, Jabar Al-Luaibi, said on Saturday.

Other factors, including political risk, have also supported crude.

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Still, some analysts have warned that the 13 per cent rally since the start of the year could peter out due to global refinery maintenance and rising North American production.

In other news, US energy companies added 10 oil rigs this week, the biggest increase since June.

Indeed, the latest data from Baker Hughes showed the U.S. rig count increased by 10 last week to 752 - the biggest weekly increase in a year and a half.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures posted a strong gain last week, taking the markets to multi-year highs.

Vienna-based consultancy JBC Energy expects US production to grow by 600,000 bpd in the first quarter of 2018 compared to a year earlier. "From a fundamental perspective, the surge in USA managed money raises a clear red flag for us". And they added the surplus in crude is expected "to widen to levels that will overwhelm the market", JBC said in a note.

"Given the current strength in prices, it is no surprise that we are seeing a pickup in rig activity", said Khan at ING.