US crude settles at $51.90, up $1 a barrel, on signs producers will comply with output cuts

Oil rose on Friday, edging closer to new 17-month highs as producers showed signs of adhering to a global deal to reduce output.

Oil producers including Kuwait, Saudi Arabia, and Abu Dhabi, who are members of the Organization of the Petroleum Exporting Countries (OPEC), have notified customers that they would cut supplies from January as part of an effort by OPEC and other producers led by Russia to balance an oversupplied market.

Brent crude oil futures were trading at $55.19 per barrel up $1.17, or 2.2 percent, at 2:39 p.m. ET (1939 GMT).

U.S. West Texas Intermediate (WTI) crude settled up $1, or 2 percent, at $51.90 per barrel.

"The petroleum markets are extending their recovery from Thursday's low as some confidence in planned production cuts returns to the market," Tim Evans, Citi Futures' energy futures specialist, said in a note.

OPEC members have agreed to reduce output by a combined 1.2 million barrels per day (bpd) from Jan. 1, their first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much.

Those deals, clinched over the past two weeks, have boosted expectations in the market that a two-year supply overhang will clear soon and prices remain near highs last seen in July 2015.

Russia said on Friday that all of the country's oil companies, including top producer Rosneft, had agreed to reduce output.

The prospect of lower production led U.S. bank Goldman Sachs to raise its WTI price forecast to $57.50 per barrel from $55 per barrel previously for the second quarter of 2017.

For Brent, Goldman expects prices between $55 and $60 per barrel after the first half of 2017.

Despite the possible price floor, Goldman said there was also limited room for market upside prior to 2017's cuts, and that its December WTI price forecast was $50 per barrel.

"There will be little evidence of production cuts until mid to late January which we believe will be the next catalyst for the next large move in prices," Goldman said.

There were, however, some ongoing doubts about the willingness of other OPEC members to comply.

Iraq, the group's second biggest producer after Saudi Arabia, has signed new deals that will increase its sales to Asian customers like China and India despite its commitment to reduce output by 210,000 bpd.

Libya, which is allowed to ramp up production as part of the OPEC deal, is close to increasing output crimped by unrest after a group of oil guards said they had reopened a long-blockaded pipeline linking some of the country's biggest oilfields.

Libya's National Oil Corp has said it hopes to raise production to 900,000 bpd in the near future, and to 1.1 million bpd next year.

Baker Hughes reported its weekly count of U.S. oil rigs in operation rose by 12 to 510 in the last week. That was the highest level since the end of January, when drillers also had 510 oil rigs in operation.

— CNBC's Tom DiChristopher contributed to this article.