Oil tops $55 for first time in 16 months as OPEC deal fuels buying

By Karolin Schaps

LONDON (Reuters) - Brent crude oil rose above $55 a barrel on Monday, trading at a 16-month high, on rising prospects of a tightening market after OPEC agreed a landmark deal to cut production last week.

Monday's gains take the rally since the agreement was struck on Wednesday to 19 percent for Brent, the biggest jump in almost eight years, and 16 percent for U.S. crude.

Brent futures, the global benchmark used to trade oil, soared to their highest since July 2015 at $55.33 a barrel. They were at $55.04, up 58 cents, or 1 percent, at 1431 GMT.

West Texas Intermediate (WTI) crude traded up 48 cents, also 1 percent, at $52.16 a barrel.

"OPEC sentiment continues to support oil markets. Speculative short positions are still at elevated levels and as more traders unwind these positions they could trigger more support for oil prices," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

The OPEC deal has given speculators impetus to increase bets on higher oil prices. Weekly data from the InterContinental Exchange on Monday showed investors had raised net long positions on Brent to the highest level in four weeks.

After the Organization of the Petroleum Exporting Countries last week agreed to curb production by 1.2 million barrels per day (bpd) from January, eyes have now turned to a meeting this weekend between OPEC and non-OPEC producers to expand the deal.

Non-OPEC producers are expected to agree to add an output cut of 600,000 bpd in Vienna on Dec. 10.

Transneft, Russia's pipeline monopoly, suggested on Monday a cut to oil output could begin in March.

Iran, which was granted an output rise as part of the OPEC deal as it recovers production curbed by sanctions, will also attend the meeting, SHANA news agency said.

(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and David Evans)