Crude oil prices have broken down the resistance levels of 3,870 and has rallied up till 3,950 levels.
The higher pricing is nearly entirely due to the withdrawal of about 1.8 million barrels a day in global crude oil supplies resulting from the OPEC-initiated production cuts.
While OPEC producers have chose to roll over the production cuts through the end of 2018, non-OPEC supply will increase more than previously expected, and total supply growth could exceed demand growth next year, the International Energy Agency (IEA) said in December's Monthly Oil Market Report.
"In our view, if the brent price averages around $60/bbl in FY18, inflationary pressure will rise, but will still be manageable".
Analysts at JBC Energy say the biggest short-term risk is if the Iranian government's response to the protests spurs further sanctions from the U.S., with President Donald Trump said to be unlikely to certify the landmark nuclear deal with Iran later this month.
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Traders had been buying crude amid supply outages and renewed production cuts led by Opec, the producers' cartel, and Russian Federation.
"Beyond the recent focus on street protests, the potential reinstatement of United States sanctions targeting the Iranian oil industry remains an issue", JBC analysts said. The cuts began previous year, and the producers have made a decision to extend the agreement through the end of 2018. Strong demand growth, especially from China, has also been supporting crude.
The Opec adherence to the global oil output cut increased by 3% in December 2017 to reach 128%, according to a Reuters survey.
That's down 20 percent from their historic peaks last March and close to the five-year average of 420 million barrels. Crude production in October rose to the highest in more than 46 years, according to the latest figures available from the EIA, and there are few signs of significant reductions since then.
But the more prices increase, especially with Brent prices near $70, and WTI prices above $60, the more likely US shale drilling and production rates will accelerate, which will tend to frustrate the objective of lowering stocks.
OPEC members have a poor track record of sticking to agreed quotas, but they kept within 95% of the required cuts, with Saudi Arabia cutting further, meaning the aggregate production cut held. Another concern is Venezuela, where dire economic conditions have taken a toll on oil production.