Brent crude prices edged past the $55 per barrel mark on Tuesday morning as OPEC prepares to trim production.
Brent crude rose to $55.79 just before noon on Tuesday, up from a previous close of $55.16 per barrel.
West Texas Intermediate ticked up to $53.69 per barrel on Tuesday, up from a previous closing price of $53.02 per barrel.
Earlier this month, OPEC agreed to trim production down to 32.5 million barrels per day, or a 1.2 million bpd reduction from the group’s record-breaking October level.
The cuts will be effective beginning on January 1.
Following the OPEC deal, a group of 14 non-OPEC producers, including Russia, agreed to cut their total production by 558,000 bpd.
OPEC said the reductions can either be done voluntarily or through managed decline, in accordance with an “accelerated schedule.”
The cuts will be effective as of January 1 for an initial duration of six months.
OPEC said the production plan will be extendable for an additional six months “to take into account prevailing market conditions and prospects.”
U.S. shale drillers are expected to be the big winners as global crude prices continue to climb.
S&P Global Platts found earlier this month that shale producing regions in Texas could see returns in excess of 40 percent after the OPEC cuts are implemented.
Platts added that it found clear evidence that U.S. shale producers have “incentive to up step production,” with producers operating in the Permian’s Delaware and Midland areas expected to reap the largest benefits.
The International Energy Agency (IEA) said this month that global oil inventories could shrink faster than initially anticipated following the non-OPEC agreement.
The IEA said that if OPEC “promptly and fully sticks to its production target,” and non-OPEC producers fulfill their planned cuts, the market “is likely to move into deficit in the first half of 2017” by an estimated 600,000 barrels per day.
However, the IEA warned that the uncertainties in the oil market and global economic forecasts mean there is no guarantee that producers will continue to curb production.
“The price curve reflects this with a sharp increase in short-term prices but shows relatively little movement further out,” the IEA said.