LONDON (Reuters) - Oil prices rose on Tuesday on evidence that the global market was tightening as lower production by OPEC and other exporters drained stocks, but analysts said higher U.S. output could eventually limit gains.
Benchmark Brent crude was up 40 cents at $55.63 a barrel by 1025 GMT. U.S. light crude was 40 cents higher at to $53.15.
Ministers from the Organization of the Petroleum Exporting Countries and big producers outside the group said on Sunday that of the almost 1.8 million barrels per day (bpd) they had agreed to remove from the market starting on Jan. 1, 1.5 million bpd had already been cut.
Ministers were engaged in a campaign of "bullish rhetoric", talking up their deal to make sure the market responds positively, said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
"Call it a charm offensive or determination to succeed," Varga said. "One thing is certain: the level and the depth of cooperation between OPEC and non-OPEC producers is unprecedented."
Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. This amounts to about 60 days of world oil consumption.
"This is the biggest quarterly decline since the fourth quarter of 2013, confirming that inventory builds are now reversing as the market shifts from oversupply to undersupply," Bernstein analysts said in a note to clients.
Iraq's oil minister said on Monday most major oil companies working in its territory were participating in output reductions agreed as part of the OPEC deal.
But the reduction in supply by oil majors is being offset by an increase in U.S. production as prices rise.
U.S. drillers added the most rigs in nearly four years, data from energy services company Baker Hughes showed on Friday, extending an eight-month drilling recovery.
U.S. oil production has risen by more than 6 percent since mid-2016, though it remains 7 percent below the 2015 peak. It is back to levels seen in late 2014, when strong U.S. crude output contributed to a crash in oil prices.
"The rising oil supply from the United States in coming months is likely to preclude any further increase in oil prices," said Commerzbank analyst Carsten Fritsch. "In view of the record-high optimism exhibited by speculative financial investors, we see a risk of falling prices."
(Additional reporting by Naveen Thukral in Singapore; Editing by Greg Mahlich)