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Dec. 2, 2016, 3:51 p.m. EST

Oil scores weekly gain of over 12% on back of OPEC pact

WTI crude marks a third-straight session gain

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By Myra P. Saefong, MarketWatch , Jenny W. Hsu

Oil futures finished higher Friday, scoring a weekly gain of more than 12% as traders held out hope for the success of OPEC’s output deal to help shrink the world’s glut of crude supplies.

January West Texas Intermediate crude /zigman2/quotes/209723641/delayed CLF27 0.00% tacked on 62 cents, or 1.2%, to settle at $51.68 a barrel on the New York Mercantile Exchange. Prices climbed nearly 13% over the past two sessions alone, as the market cheered the deal reached Wednesday among the globe’s major oil producers.

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For the week, prices were about 12.2% higher—the largest weekly percentage gain since the week ended Jan. 2, 2009, according to data from Dow Jones.

February Brent crude rose 52 cents, or 1%, to settle at $54.46 a barrel, with prices based on the front-month contracts for the global oil benchmark ending roughly 12.9% higher for the week.

Both Brent and WTI crude settled at their highest levels since July 2015, according to data from Dow Jones.

Oil prices got a added boost on news that the U.S. Senate has approved a bill that will extend sanctions against Iran’s missile development and weapons program that was not part of last year’s nuclear pact. President Barack Obama is expected to sign the bill.

“It is clear that this will not help positive developments in U.S. and Iranian relations,” said Troy Vincent, oil analyst at ClipperData. And “the potential for deterioration in U.S.-Iran relations puts the future of Iranian crude exports in question once again,” he said.

Phil Flynn, senior market analyst at Price Futures Group, said it may be a bit of a stretch to assume that there may be less oil from Iran because of the sanctions, but the chance for that exists.

These sanctions were to expire at the end of the year, assuming Obama signs the bill, “this gives the new president some cover if he wants to lower the boom on Iran if [it] misbehaves,” said Flynn.

The Organization of the Petroleum Exporting Countries reached an agreement Wednesday to scale back their output to a ceiling of 32.5 million barrels a day. OPEC member Iran Key oil producers not part of the group also pledged to ease back production by another 600,000 barrels a day.

Read: The surprise OPEC oil deal that was 2 years in the making

The production cut pact is expected to take effect in January and participating oil nations will reassess in six months with an option to extend the accord for another six months.

“Even with the Vienna OPEC meeting concluded, OPEC news will still largely drive the next 6 months of trading,” said Troy Vincent, oil analyst at ClipperData.

“It’s much easier to coordinate an agreement than it is to enforce one, and if history is any indicator, economic theory and cheating will play out as it always has,” he said. “The adherence to the agreement, as well as the conditionality of the non-OPEC piece of the cut, is yet to be seen and will be the focus of attention in the coming weeks.”

Based on a Goldman Sachs' forecast, compliance rate by members this time around is approximately 73% of the target, which would put OPEC’s overall production at 33 million barrels a day.

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