Oil rises further above $55, looming supply cuts support

By Alex Lawler

LONDON (Reuters) - Oil edged further above $55 a barrel on Tuesday, drawing support from expectations of tighter supply once the first output cut deal between OPEC and non-OPEC producers in 15 years takes effect on Sunday.

Jan. 1 is the official start of the deal agreed by the Organization of Petroleum Exporting Countries and several non-OPEC producers to lower production by almost 1.8 million barrels per day (bpd).

Brent crude was up 54 cents at $55.70 a barrel at 1501 GMT. The global benchmark reached $57.89 on Dec. 12, the highest since July 2015. U.S. crude gained 63 cents to $53.65.

The members of an OPEC and non-OPEC committee formed to monitor the market may meet on Jan. 13, two sources said. Oil rallied further after news of the meeting, which may give an early indication of compliance with the deal.

"From January, we'll start to have a better idea about the level of OPEC production. That is going to be more and more of a focus," said Olivier Jakob, oil analyst at Petromatrix, who added prices will struggle to rally much further.

"To go above $60 is going to be difficult. We're already close to the top rather than the bottom of the range right now."

There was no trading on Monday after the Christmas holiday, and volume was light on Tuesday.

Russian oil producer Gazprom Neft said on Tuesday it planned to increase oil production by 4.5-5 percent next year, less than it had intended before Russia joined the supply cut deal.

Major OPEC members such as Saudi Arabia and Iraq have informed customers of lower supplies. But Libya and Nigeria - which are exempt from reductions because conflict has curbed their output - have been increasing production.

While the outright price of crude is being supported by the prospect of lower supplies, the impact in the physical market will probably differ according to the type of crude.

Price differentials for lighter crudes could weaken once the supply cut comes into force as producers are expected to trim back output of their heavier grades, analysts at JBC Energy said in a report.

"Going into 2017, we expect that the premiums for light, sweet grades may be increasingly pressured as a result of the joint OPEC and non-OPEC output cut agreement which is supposed to reduce primarily the availability of medium-sour crudes," JBC said.

(Additional reporting by Osamu Tsukimori in Tokyo; Editing by Hugh Lawson and Alexandra Hudson)