U.S. West Texas Intermediate crude (WTI) gained 36 cents to $62.09 and reached its highest since May 2015 as well at $62.56. Last month's report showed a forecast for 2018 record USA crude output of 10 million barrels a day.
A senior OPEC source from a major Middle Eastern oil producer said on Monday that OPEC was monitoring unrest in Iran as well as Venezuela's economic crisis, but will boost output only if there are significant and sustained production disruptions from those countries.
"The potential for new sanctions, which could restrict [crude] supply" is supporting prices, said Geordie Wilkes, a research analyst at brokerage Sucden Financial. US commercial crude inventories fell by 7.4 million barrels (MMBbl) in the week ended December 29, to 424.46 MMBbl, according to data from the Energy Information Administration.
A key USA government report on Wednesday is expected to show crude stockpiles dropped for an eighth straight week.
"U.S. crude oil production is forecast to average 10.3 million b/d in 2018, which would mark the highest annual average production in US history, surpassing the previous record of 9.6 million b/d set in 1970", the report said.
"We are in winter, a season in which prices go up as demand for petroleum products goes up", Iranian oil minister added.
"We expect oil demand growth to outpace non-OPEC supply growth in both 2018 and 2019", analysts stated.
Crude oil futures continued to surge Tuesday on expectations the global oil market will soon re-balance. The price of Brent has risen roughly almost 30% over the past year.
Nationwide output will average 10.85 million barrels a day next year and 10.27 million this year, both surpassing the prior record of 9.6 million pumped in 1970, the Energy Information Administration said in its monthly Short-Term Energy Outlook, which included the first estimates for 2019.
However, some analysts believe market participants are getting to optimistic, especially given expectations for an increase in US shale production.
In its Short-Term Energy Outlook, released Tuesday, the agency said it expects USA production to break above 11 million barrels per day in November 2019.
Futures extended gains to as much as 1.7% in NY.