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Oil prices hit fresh highs, but worries grow of overheated market

Reuters  |  LONDON 

By George

(Reuters) - prices hit new multi-year highs on Wednesday as OPEC-led production cuts and healthy demand helped to balance the market, but analysts warned of possible overheating.

A broad, market rally, including stocks, has also been fuelling investment into futures.

U.S. Intermediate (WTI) futures were at $63.34 a barrel, up 38 cents, at 1440 GMT. Earlier prices rose to $63.67, the highest since Dec. 9, 2014.

Brent futures were at $69.02 a barrel, 20 cents above their last close. Brent earlier hit $69.37, the highest since May 2015.

"We're still drawing U.S. stocks and that continues to support a very positive sentiment," said Olivier Jakob, of

He noted that physical Brent was above $70 per barrel - a psychologically important level.

"It will trigger some increased discussion within OPEC," Jakob said.

The Organization of the Exporting Countries, together with and a group of other producers, last November extended an output-cutting deal to cover all of 2018.

The cuts were aimed at reducing a supply overhang that had dogged markets since 2014.

But some in the group fear current price gains could prompt shale companies to flood the market.

U.S. production is expected to hit 10 million barrels per day (bpd) next month, leaving only and at higher levels.

American Institute data on Tuesday showed U.S. inventories falling by 11.2 million barrels in the week to Jan. 5.

Additionally, the (EIA) raised its 2018 world demand growth forecast by 100,000 bpd from its previous estimate.

Official EIA stocks data is due at 1530 GMT on Wednesday.

prices have risen more than 13 percent since early December, and there are indications of overheating. Analysts warned that the market is ignoring U.S. production increases at its peril.

The average price for Asian grades has risen to $70.62, Eikon data showed, which has pressured the region's refinery margins.

"Selective perception is the reason why the market is completely ignoring this just now," said of rising U.S. production. "Attention is paid only to that tallies with the picture of rising prices."

(Additional reporting by and Roslan Khasawneh; in Singapore; Editing by and David Evans)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 10 2018. 20:39 IST