By Sarah McFarlane and Dan Strumpf

Oil futures began the year with a jolt Tuesday, with Brent hitting a more-than one-year high, boosted by anticipation the production cuts agreed late last year would kick in and help drain global stockpiles.

The Organization of the Petroleum Exporting Countries, along with other oil producing countries including Russia, agreed to cut output by 1.8 million barrels a day or around 2% of global production starting this month.

Brent crude, the global oil benchmark, rose 2.3% to $58.11 a barrel on London's ICE Futures exchange, having earlier peaked at $58.37, its highest level since July 2015. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 2.4% at $54.98 a barrel.

"It may be moving in anticipation that evidence will emerge that stocks are coming off," said Gareth Lewis-Davies, senior commodity strategist at BNP Paribas.

Oil prices last year posted their biggest gains since the financial crisis-era rebound in 2009, a recovery fueled by a drawdown in global stockpiles and a resurgence in OPEC's willingness to control prices. Traders and analysts are likely to keep their attention on OPEC's next moves, as well as on the actions of individual members and their willingness to follow through on the proposed cuts, given their checkered history when it comes to adhering to quotas.

"It's going to be a year in which price action is driven by OPEC and these cuts," said Virendra Chauhan, oil analyst at Energy Aspects in Singapore. "It's going to be very much a case of the extent that these guys are complying with the production cuts set at the end of November."

Another factor likely to dominate trading in 2017 will be how U.S. oil producers respond to the higher oil prices, after the production cut deal sent prices back above $50 a barrel. Already, U.S. shale producers have responded to last year's price rebound by adding rigs, and any steep increase in prices is likely to spur more drilling. The pace of Indian and Chinese demand growth will also likely be in focus.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 1.6% to $1.70 a gallon. ICE gasoil changed hands at $513.25 a metric ton, up $12.25 from the previous settlement.

Write to Sarah McFarlane at

(END) Dow Jones Newswires

January 03, 2017 05:52 ET (10:52 GMT)

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