Oil prices on track for greatest yearly percentage gain since 2009

Oil prices are on track for their biggest annual percentage gain since 2009 on the back of an agreement struck between OPEC and non-OPEC countries to cut crude production output.

US benchmark West Texas intermediate (WTI) crude futures were up 15 cents or 0.3 per cent at $53.92 at 0408 GMT. Brent front-month March crude oil futures were 14 cents a barrel or 0.3 per cent higher at $56.99.

Brent futures have risen about 53 per cent this year while WTI futures have climbed around 46 per cent. The 2016 gains in the oil market were the best since the 2009 rally, when Brent and WTI rose 78 per cent and 71 per cent respectively.

In a sign that producers are adhering to an agreed production cut, Oman notified some of its term customers that it will cut term allocations by five per cent in March, but did not state if the reduction in supply would continue after that.

The market also shrugged off an unexpected increase in US crude inventories, which rose 614,000 barrels in the week to December 23, US Energy Information Administration (EIA) data showed. Analysts had expected a decrease of 2.1 million barrels in the period.

Still, the rise in crude stocks in the EIA data was significantly smaller than in Wednesday's American Petroleum Institute data that indicated a 4.2 million barrel build in US crude oil stocks in the same period.

"Today's Department of Energy report was positive for light products due to draws in gasoline and distillate inventories compared to consensus' build expectations," British bank Barclays said in a note.

Gasoline stocks fell 1.6 million barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel rise.

The market is likely to have focused on the surprise draw in product stocks and taken a slightly more bullish view towards the WTI contract, traders said.

Oil prices will gradually rise towards $60 per barrel by the end of 2017, a Reuters poll showed on Thursday, with further upside capped by a strong dollar, a likely recovery in US oil output and possible non-compliance by OPEC with agreed cuts.