Oil prices rise as OPEC output cuts drain stocks

Increased drilling in the United States, however, could keep a lid on prices.

Brent LCOc1 futures gained 21 cents, or 0.4 percent, to settle at $55.44 a barrel, while U.S. West Texas Intermediate CLc1 gained 43 cents or 0.8 percent, to $53.18 per barrel.

That put WTI up for a fourth day in a row, its longest winning streak since the end of December.

Post settlement, prices pared gains after weekly inventory data from The American Petroleum Institute (API) showed U.S. crude, gasoline and diesel stocks all rose last week.

The Energy Information Administration (EIA) will report its data at 10:30 a.m. EST on Wednesday.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) 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.

Saudi Arabia's oil output is likely to drop to around 9.9 million bpd in January, according to industry sources and shipping data. The kingdom said it pumped 10.47 million bpd in December.

"The comments out of OPEC are the primary reasons for the price increase on Tuesday. That and recent weakness in the dollar, which is actually masking some serious weakness in oil," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey.