Oil price surges to highest in more than two years

New figures showing Opec members cutting back supplies and sticking to targets boosts market

An Aramco oil installation in the Saudi Arabian desert near Al Khurais. Opec has reduced output and complied significantly with targets, driving up price of crude. Marwan Naamani / AFP

Oil rose to its highest since mid-2015 on Wednesday as data showed Opec has significantly improved compliance with its pledged supply cuts and Russia is also widely expected to keep to the deal.

Brent crude futures were up 59 cents at US$61.53 per barrel at 09.05 GMT, having hit a session peak of $61.70 earlier, the highest since July 2015.

US West Texas Intermediate (WTI) crude was at $55.12 a barrel, up 74 cents.

The oil price gained 7 per cent in October, marking the fourth consecutive month of gains.

"The bulls have it and momentum is strong," said the Saxo Bank senior manager Ole Hansen.

"We know how oil can easily run ahead of what is fundamentally justified and we've seen that in both directions in the last couple of years," he said. "We really need to see demand growth pick up even more strongly than what is currently expected for the bullish outlook for to be maintained."

Optimism has been fuelled by an effort this year lead by Opec, Russia and other producers to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets.

Opec's October output fell by 80,000 bpd to 32.78 million bpd, putting adherence to its pledged supply curbs at 92 per cent, up from September's 86 pe rcent.

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Analysts and traders expect Russia to stick to its agreement to curb its oil output by 300,000 bpd from 11.247 million bpd reached in October 2016.

Saudi Arabia and Russia are considering extending the agreement to potentially cover all of next year.

Should participants after that return to full capacity and US output also grow, a supply glut could return.

"We could rapidly ... go from a predicted deficit of around 260,000 barrels to a surplus of close to 1.5 million barrels. Prices would undoubtedly collapse," said Matt Stanley, a fuel broker at Freight Investor Services.

Another factor will be US output, which has risen by almost 13 per cent since mid-2016 to 9.5 million bpd.

"US crude oil production is 410,000 bpd below the April 2015 peak of 9.62 million bpd. We expect production to surpass this level before year-end," Barclays bank said.