Due to the market optimism largely led by the ongoing production cuts from the Organization of Petroleum Exporting Countries as well as other participating non-member countries to cut as much as 1.8 million barrels per day as a part of their efforts in boosting and pushing oil prices higher as well as preventing a global oversupply.
Major oil producing-countries have grown concerned that as prices remain near these levels, it will spur additional production from USA shale patches in Texas and North Dakota, risking overwhelming the market with additional supply, and hurting OPEC's market share.
U.S. West Texas Intermediate (WTI) crude futures settled at $63.57 a barrel, up 61 cents, or 1 percent, their highest settlement since December of 2014.
Daily Brent spot market prices ended 2017 near $67/Bbl - the highest level since December 2014, Kallanish Energy reports.
Brent crude futures were at $69.11 a barrel, down 15 cents, or 0.2 percent, from their last close.
Domestic crude production is up 6% year over year to about 9.5 million barrels a day, and that number is expected to rise to around average around 10 million barrels a day this year and should reach that level in the next month or two.
A broad, global market rally, including stocks, has also fed investment into oil futures.
Any change in production limits must be driven by a change in market fundamentals and not just speculations for a short period of time, for OPEC to change the output ceiling, he said. "In general, by May, we can expect oil prices to rise gradually to $75 per barrel, if the trend continues and there will be no shocks", Igor Yushkov predicts.
The catalyst seems to have been data from the American Petroleum Institute, which said late Tuesday that US crude inventories fell by 11.2 million barrels, to 416.6 million barrels.in the week leading to January 5.
"Oil prices are finely balanced in today's trading session".
Fatih Birol, head of the Paris-based International Energy Agency, said oil prices at $65 to $70 risked encouraging more oversupply from US shale drillers.
Consumers will face gasoline and heating oil price increases this year despite a federal forecast for record-breaking domestic oil production.
Oil rose, clinging to last week's gains as political tensions in Iran and declining exploration work in the U.S. threatened output growth. At the same time, the price increase of oil has also produced gains for oil company stocks. The global benchmark traded at a premium of $5.66 to March WTI. Since mid-July, Saudi, the largest producer pledged to lower crude oil exports. This came as the US Energy Information Administration raised its 2018 world oil demand growth forecast by 100,000 barrels per day from its previous estimate.