US crude settles at 17-month high after small, pre-holiday gain

US oil prices closed at a 17-month high on Friday in quiet trade ahead of the Christmas and New Year holiday week, even though the gain was small, as the market waits to see how the Organisation of the Petroleum Exporting Countries (Opec) manages its planned output cuts with Libya expecting to boost production.

Despite the 17-month high in US futures, prices were little changed on Friday in a market that closed early for the Christmas holiday.

Brent futures gained 11 cents, or 0.2 per cent, to settle at $55.16 a barrel, while US West Texas Intermediate (WTI) crud gained seven cents, or 0.1 per cent, to settle at $53.02, its highest close since July 2015.

That topped the previous 17-month high close for WTI set last week by a nickel and was the front month's sixth daily gain in a row, its longest winning streak since August.

It also put the WTI contract up for a fifth week in six, gaining about 22 per cent since mid-November, which traders said was mostly related to the Opec production cut agreement.

"Friday was a quiet, low volume day with little price movement," said Phil Davis, managing partner of venture capital fund PSW Investments in Woodland Park, New Jersey, noting WTI gained just enough pennies to set a new 17-month high.

"This is the time for maximum hype in oil. It's all related to the Opec deal to cut output," Davis said, warning the high prices will not last if the market does not see the Opec cuts over the longer term.

Over the past few weeks, the Opec and non-OPEC members agreed to lower output by almost 1.8 million barrels per day (bpd) from January 1.

While major Opec producers including Saudi Arabia and Iraq have told customers that supply will be cut in line with the Opec deal, Libya and Nigeria are exempt because conflict has already curbed their output.

Libya's National Oil Corp hopes to add 270,000 bpd to national production over the next three months after announcing on Tuesday the reopening of pipelines leading from two major fields, Sharara and El Feel.

Another factor that analysts said could soon weigh on the oil market was an announcement this week that Saudi Arabia would boost domestic fuel prices as the government reduces its subsidies.

That could reduce internal oil consumption and leave more Saudi barrels for the export market, Tim Evans, Citi Futures' energy futures specialist, said in a report.