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Oil prices rose on Monday, supported by reports that an OPEC-led supply cut may not only be extended into next year but might also be deepened to tighten the market and prop up prices.
Brent crude futures were up 32 cents, or 0.6 per cent, from their last close at $53.93 per barrel at 0145 GMT.
US West Texas Intermediate (WTI) crude futures were back above $50 per barrel, trading up 32 cents, or 0.6 per cent, at $50.65.
Both benchmarks have risen more than 10 per cent from their May lows early in the month.
Prices have risen because of expectations that a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to cut supplies by 1.8 million barrels per day (bpd) would be extended to March 2018, instead of covering just the first half of this year.
The option of deepening the production cut was also being discussed ahead of a meeting of OPEC and its allies in Vienna on May 25, sources said.
“Oil soared ... as rumours swirled that OPEC... was considering recommending the double whammy of a production cut extension and deeper cuts ahead of this Thursday's meeting," said Jeffrey Halley, analyst at futures brokerage OANDA in Singapore.
James Woods, analyst at Australia's Rivkin Securities, said that a deeper cut may be required to rein in oversupply.
This is because OPEC's oil supplies in 2017 have so far not actually fallen when compared with last year, when oversupply was seen at its worst.
In fact, the US Energy Information Administration (EIA) expects “OPEC net oil export revenues will rise to about $539 billion dollars in 2017, versus 2016".
“The expected increase in OPEC's net export earnings is attributed to slightly higher forecast annual crude oil prices in 2017 as well as slightly higher OPEC output during the year," the EIA said.
OPEC's pledge to tighten the market is also being undermined by oil drillers in the United States.
Goldman Sachs says that the US rig count for new oil production had jumped by 404 since May last year, a rise of 128 per cent.
US oil production has already climbed by 10 per cent, or almost 900,000 bpd, since mid-2016 to 9.3 million bpd.
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