Oil prices rose to near three-week highs on Tuesday after OPEC said it was sticking to its agreement to cut production and hoped compliance with the deal would be even higher as it expects other producers join its efforts to curb a global glut.
OPEC Secretary General Mohammad Barkindo told an industry conference in London that January data showed conformity from participating OPEC nations with output curbs had been above 90 percent and oil inventories would decline further this year.
"All countries involved remain resolute in the determination to achieve a higher level of conformity," Barkindo said.
Benchmark Brent crude oil jumped 48 cents a barrel, or 0.9 percent, to $56.66 by 2:46 p.m. ET (1946 GMT). It hit a high of $57.31 earlier in the day.
U.S. light crude settled up 66 cents, or 1.2 percent, at $54.06, off a session peak of $54.68.
U.S. gasoline futures were the biggest drag on the energy complex, falling 1.5 percent to $1.4942 a gallon. That pushed gasoline crack spreads, an indicator of refining margins, to a fresh one-year low.
The Organization of the Petroleum Exporting Countries and other producers outside the group agreed in November to cut output by about 1.8 million barrels per day (bpd) in an effort to drain a glut that has depressed prices for over two years.
Barkindo said it was too early to say if the supply cut, which lasts for six months from Jan. 1, would need to be extended or deepened at the next OPEC meeting in May.
"While Barkindo's statement puts a confident spin on market fundamentals, we'd say questions do remain, given that Iran seems to be signaling increased production rather than improved compliance," Tim Evans, an energy futures specialist at Citi Futures said in a note.
Under the deal, Iran was allowed to boost output from its October level and Tehran expects its oil production to reach 4 million barrels per day by mid-April.
Iranian Oil Minister Zanganeh told state TV that OPEC and non-OPEC oil producers are committed to the production cut.
From a technical perspective, the tight consolidation above last year's key broken resistance levels suggests oil prices have been coiling to break higher, said Fawad Razaqzada, technical analyst for Forex.com.
"I am anticipating both oil contracts to break out of their recent ranges and head higher."
Since the OPEC deal in November, crude prices have moved in a tight $5-band.
The OPEC cuts, however, have spurred a speculative move into crude oil that has pushed prices towards the top of their recent ranges that might prompt a correction.
Money managers hold the highest number of net long Brent and U.S. crude futures and options on record, data showed on Monday and Friday, betting on higher prices to come as OPEC and other key exporters reduce production.
"Should there come a time when these speculative positions decide to unwind, oil prices will be in for a significant correction," said Jonathan Chan, an investment analyst at Phillip Futures.
Still, the Relative Strength Index (RSI) in U.S. crude futures remained at about 58 on Tuesday, well below the overbought level of 70, Reuters data showed.
Bank of America Merrill Lynch cut its forecast for Brent crude prices to an average of $50-70 through 2022, from $55-$75 amid a recovery in U.S. shale production.