Oil prices have hit their highest levels since 2014 due to ongoing production cuts led by OPEC as well as healthy demand, however, analysts warn that markets may be overheating.
A broad global market rally, including stocks, has also been fuelling investment into crude oil futures.
US West Texas Intermediate (WTI) crude futures CLc1 were at $63.57 a barrel in early trading today - 51 cents, or 0.81%, above their last settlement and the highest level since December 2014.
Brent crude futures LCOc1 were at $69.29 a barrel, 37 cents, or 0.54%, in late Tuesday trading, its strongest price since an intra-day spike in May 2015.
“The extension of the OPEC agreement and declining inventories are all helping to drive the price higher,” William O‘Loughlin, investment analyst at Australia’s Rivkin Securities, told Reuters.
In an effort to prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) together with Russia and a group of other producers last November extended an output cut deal that was due to expire in March this year to cover all of 2018.
The cuts, which have mostly targeted Europe and the US, were aimed at reducing a global supply overhang that had dogged oil markets since 2014.
The American Petroleum Institute said this week that crude inventories fell by 11.2 million barrels in the week to Jan. 5, to 416.6 million barrels.
Amid the general bull-run, which has pushed up crude prices by over 13%t since early December, there are indicators of an overheated market.
In the US, crude oil production is expected to break through 10 million barrels per day (bpd) this month, reaching levels only Russia and Saudi Arabia have achieved.
In Asia, the world’s biggest oil consuming region, refiners are suffering from high prices and ample fuel supplies.
“One area of concern, particularly in Asia, is that of (low) refining margins ... This drop in margins could reduce Asian refiners’ demand for incremental crude in the near term and weigh on global prices,” Sukrit Vijayakar, director of energy consultancy Trifecta, told Reuters.