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Asian shares shrug off Wall St. weakness, dollar steadies

Asian shares rose on Tuesday, shrugging off modest losses on Wall Street, while expectations of another U.S. interest rate increase this year continued to underpin the dollar.

Futures suggested a more subdued start to the European trading day, with the Eurostoxx 50 and Germany's Dax futures both down 0.1 percent. France's Cac futures and FTSEfutures were both slightly lower.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.6 percent.

Japan's Nikkei stock index reversed early losses and finished 0.6 percent higher, as markets reopened after a public holiday on Monday.

China stocks retreated from the previous session's 21-month highs as investors took profits on recent gainers and awaited third-quarter economic data and earnings reports. The bluechip CSI300 index fell 0.3 percent while the Shanghai Composite Index was down 0.1 percent.

China's Statistics Bureau on Tuesday said that the country will have no problem meeting its economic growth target of around 6.5 percent this year, and may even beat it. Such an outcome had been widely expected after a robust start to the year.

Offshore Chinese yuan surged to its strongest levels in more than two-weeks, after the central bank set a firmer-than-expected official fix on Tuesday. The move suggests that the authorities are trying to stabilize the currency ahead of next week's key national leadership meeting.

Korean shares rallied 1.6 percent on their first day of trading this month, as tech shares led by Samsung Electronics (KS:005930) Co Ltd caught up with gains made by global stock markets after a long break.

Seoul markets were closed last week and on Monday for public holidays.

"Global stock markets marked strong gains while Seoul markets were off, and the price of semiconductors continued to rally," said Lee Seung-woo, a stock analyst at Eugene Investment & Securities.

Tensions on the Korean peninsula continued. Russian Foreign Minister Sergei Lavrov told U.S. Secretary of State Rex Tillerson in a phone call on Monday that an escalation was unacceptable.

Russia and China both called for restraint on North Korea on Monday after U.S. President Donald Trump warned over the weekend that "only one thing will work" in dealing with Pyongyang, hinting that military action was on his mind.

Investors were particularly wary on Tuesday, when Pyongyang celebrated the founding of its ruling party, which loomed over other market factors.

"We are expecting a December Fed rate hike, so we are expecting the trend to be dollar strength and yen depreciation, though whenever North Korean risks rise, that pushes down the dollar," said Harumi Taguchi, principal economist at IHS Markit in Tokyo.

Interest rate futures are now pricing in nearly a 90 percent chance that the U.S. Federal Reserve will rise rates again in December.

The dollar was steady on the day against its Japanese counterpart at 112.67 yen. On Friday, it had risen as high as 113.44 yen, its highest level since July 14.

The perceived safe-haven yen typically rises when investors try to reduce their risk exposure because the currency is often used as a funding source to buy riskier, higher-yielding assets.

Japan is also the world's largest net creditor nation, and at times of uncertainty, traders assume Japanese investors' repatriation from foreign countries will outweigh foreign investors' selling of Japanese assets.

The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.2 percent to 93.533, moving away from Friday's peak of 94.267. That was its loftiest level since July 20, after data showed a stronger-than-forecast increase in U.S. average hourly earnings in September.

The euro added 0.3 percent to $1.1770, after it got a lift on Monday from data showing German industrial output notched its biggest monthly increase in more than six years in August.

Also helping the euro were comments from a European Central Bank Executive Board member, who called for the central bank to reduce its asset purchases next year. The ECB is due to decide on Oct. 26 whether to continue its bond buying in 2018.

Crude oil prices edged slightly higher, underpinned by OPEC comments signaling the possibility of continued action to restore market balance in the long-term.

But gains were seen as limited as oil production platforms in the Gulf of Mexico started returning to service after the latest U.S. hurricane forced the shutdown of more than 90 percent of crude output in the area.

Brent crude inched up 1 cent to $55.80 a barrel. U.S. crude added 2 cents to $49.60.

Gold prices hit their highest in more than a week, though gains were capped as expectations of another Fed rate hike this year supported the dollar. Spot gold added 0.2 percent to $1,286.52 an ounce.

Euro bounces to one-week highs on hawkish comments

The euro hopped to a one-week high on Tuesday as investors added positions on hawkish overnight comments by a policymaker that reaffirmed bets the euro zone economy's outlook remains robust.

The currency's rise this year has lost some momentum in recent days as political concerns - notably Spain's Catalan crisis - have grown pushing the euro down against the dollar more than 3 percent over the last month.

But on Tuesday, it bounced nearly 0.4 percent to $1.1789, its highest since Oct. 2, after overnight comments from Sabine Lautenschlaeger, a member of the European Central Bank executive board, calling for the ECB to roll back asset purchases in 2018.

"Her hawkish comments also appear supportive for the euro but the political overhang has taken the air out of the euro balloon, and this ongoing political uncertainty will most certainly cap any near-term rallies," said Stephen Innes, head of Asia-Pacific trading at OANDA.

Also helping sentiment was strong data from Germany. Industrial output posted its biggest monthly rise in more than six years in August, data showed on Monday. Data from France and Britain are due later in the day.

The dollar ran into some profit taking on Tuesday with the currency dropping a fifth of a percent against a trade-weighted basket of its rivals.

The index was last at 93.47, down 0.2 percent on the day but still in reach of a 10-week high of 94.267 scaled on Friday when surprisingly stronger U.S. September wages data enhanced already high expectations that the Fed would hike rates for a third time in 2017.

"The market will be keeping a side glance on North Korea, but much of the latest tension could have been priced in on Friday when the dollar slipped," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

"Still, the dollar is well supported and not an easy currency to sell at the moment after Friday's data showed that U.S. wages are improving steadily."

China shares hit 21-month high; Turkish lira takes a dive

Chinese shares climbed on Monday after a week-long break as a disappointing survey on the country's service sector did little to dent optimism on global growth, while political uncertainty caused turbulence for the Turkish and British currencies.

Liquidity was lacking with Japan and South Korea on holiday and a partial holiday in the United States. where stocks will be open but bonds will be closed.

The Chinese blue-chip CSI300 index rose 1.7 percent to heights not seen since late 2015, partly in a delayed reaction to a targeted easing by the country's central bank announced a week ago.

That helped offset a fall in the Caixin index of service sector activity to a 21-month trough of 50.6 in September, a contrast to healthier numbers in manufacturing.

Spreadbetters also pointed to opening gains for most major European bourses.

"The global economy continues its synchronized recovery, as evidenced by robust data across regions, including upside wage growth surprises in the U.S. and Japan," wrote analysts at Barclays (LON:BARC) in a note.

"At the same time, events in Spain and the UK also confirm a high level of political uncertainty. For now, the constructive economic developments seem to dominate political risks."

Australian stocks still managed to put on 0.5 percent, while Nikkei futures added 0.1 percent even though the cash market was shut.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.02 percent, having rebounded by 1.7 percent last week. E-Mini futures for the S&P 500 were trading 0.11 percent firmer, while futures for the Treasury 10-year note rose 1 tick.

Bond yields had initially spiked on Friday in reaction to firm U.S. wage numbers, only to retreat as fresh jitters over North Korea bolstered safe havens. [US/]

Annual growth in average hourly earnings accelerated to a relatively rapid 2.9 percent in September, outweighing a 33,000 drop in nonfarm payrolls.

The pick-up in wages boosted already high expectations that the U.S. central bank will raise rates at its December meeting, and that further hikes are likely in 2018.

Minutes of the Federal Reserve's last meeting are due on Wednesday and may well show enough support for a move by year-end. A host of Fed speeches are also due this week.

LIRA SLIDES

In currency markets, the dollar was a shade softer at 93.768 against a basket of competitors. It also edged down to 112.57 yen, having been as high as 113.43 on Friday.

The euro was a fraction firmer at $1.1737, aided by TV pictures of hundreds of thousands of people in Catalonia's capital Barcelona demonstrating against moves to declare independence from Spain.

Catalan leader Carles Puigdemont is expected to address the region's parliament on Tuesday, when he could unilaterally declare independence.

Another early mover was the Turkish lira, where the dollar surged 4 percent at one point to the highest in seven months amid a diplomatic spat with Washington.

The U.S. mission in Turkey and subsequently the Turkish mission in Washington mutually reduced visa services after a U.S. mission employee was detained in Turkey last week.

The pound had popped higher on reports British Prime Minister Theresa May could sack Foreign Secretary Boris Johnson as she tries to reassert her authority after a series of political disasters.

Sterling had been undermined by speculation that May herself could be ousted ahead of crucial Brexit talks between Britain and the EU. The initial spike could not be maintained, however, and the pound soon steadied around $1.3090.

The New Zealand dollar hit a four-month low on Monday after a final vote count in the country's tight general election released over the weekend failed to identify a clear winner.

In commodity markets, gold gained 0.5 percent to $1,282.56 an ounce and off a two-month low touched on Friday.

Oil prices regained some ground on expectations that Saudi Arabia would continue to restrain its output in order to support prices, and as the amount of rigs drilling for new oil in the United States dipped. [O/R]

Brent futures gained 13 cents to $55.75 a barrel, while U.S. crude rose 17 cents to $49.46.

Oil stable on lower U.S. rig count, expectation of ongoing Saudi output restraint

Oil prices stabilized on Monday, after a 2 percent slide on Friday, as the number of rigs drilling for new oil in the United States dipped and on expectations that Saudi Arabia would continue to restrain its output to support the market.

U.S. West Texas Intermediate (WTI) crude futures were trading at $49.38 per barrel at 0702 GMT, up 9 cents from their last close.

Brent crude futures were flat from their last close, at $55.62 a barrel.

Trading activity was low on Monday due to the Columbus Day holiday in the United States, although markets there are open.

Oil tumbled by 2 percent on Friday, with WTI dipping back below $50 per barrel, as concerns of overproduction re-surfaced.

But traders said a reported cut in the number of U.S. oil rigs drilling for new production had halted the price fall.

The U.S. rig count fell by two to 748 last week, General Electric (NYSE:GE) Co's Baker Hughes energy services firm said on Friday.

As a sign of stronger market sentiment, money managers raised their bullish bets on U.S. crude futures for the third week in a row, the U.S. Commodity Futures Trading Commission reported on Friday.

The investors raised combined futures and options position in WTI on the NYMEX and ICE markets by 3,211 contracts to 288,766 in the week to Oct. 3, its highest since mid-August, the data showed.

Meanwhile, oil ports, producers and refiners in Louisiana, Mississippi and Alabama - which shut facilities ahead of Hurricane Nate - were planning to reopen on Monday as the storm moved inland, away from most energy infrastructure on the U.S. Gulf Coast.

Traders said that Nate's impact had been lower than that of hurricanes hitting the region in the past month.

"I don't think this one (Nate) will have much of an impact on production...What will be impacted though is the refining sector," said Matt Stanley, a fuel broker with Freight Investor Services (FIS) in Dubai. "With U.S. crude exports surging and U.S. demand falling seasonally we could see the refining margins start to fall sooner rather than later."

Outside the United States, analysts said a Saudi Arabian commitment to support the market by restraining output would likely prevent crude from falling further.

"We remain fairly confident that the Saudi's will look to continue to support the oil market, especially until the sale of Aramco," said Shane Channel, equity and derivatives adviser at ASR Wealth Advisers.

State-owned oil giant Saudi Aramco is planning to float around 5 percent of the firm in an initial public offering next year.

Dollar set for fourth week of gains as markets cut short bets

The dollar rose on Friday and is on track for its fourth consecutive week of gains as investors trimmed some short bets on growing views that interest rate markets are underpricing the extent of U.S. rate increases over the coming months.

Solid U.S. economic data, along with the prospect of U.S. tax cuts and growing expectations of the appointment of a likely hawkish Federal Reserve Chair after Yellen steps down have combined to given a lift to the dollar in recent weeks.

"Some very short positions are being reduced as markets are coming around to the view that the bond markets are not reflecting the likelihood that the Fed may raise interest rates more than what is currently reflected," said Thu Lan Nguyen, an FX strategist atCommerzbank AG (DE:CBKG) in Frankfurt.

The latest poll of over 60 strategists this week showed the greenback will at best be where it is now in three, six, and 12 months as predictions were largely unchanged, suggesting the current rally will mostly be short-lived.

But some traders believe the current dollar rally may have more room to run especially if the U.S. presses ahead with significant tax reforms in the coming months or if President Donald Trump appoints a hawkish U.S. Federal Reserve chair.

Oxford Economics assigns a 40 percent probability to Kevin Warsh as the next U.S. Federal Reserve Chair, a candidate that is increasingly perceived as hawkish by the markets.

But futures markets are giving only a 40 percent probability to two rate hikes over the next 12 months, a likelihood that may change dramatically and kick U.S. Treasury yields and the greenback higher if the data improves.

The dollar index, which measures the dollar's value against a basket of six major currencies, edged up 0.2 percent to 94.097 (DXY). It rose to 94.112 at one point on Friday, its strongest level since mid-August.

The last time the dollar enjoyed a four week rising streak was back in February-March when expectations of significant U.S. tax reforms were at a fever pitch but the dollar tanked more than 10 percent in the subsequent months as those expectations faded.

The short-term focus is on U.S. job data for September, due later on Friday. The employment data is expected to show a slowdown in jobs growth, reflecting the effects from Hurricane Harvey and Irma.

According to a Reuters survey of economists, the jobs data will likely show that nonfarm payrolls increased by 90,000 jobs last month after rising by 156,000 in August.

Elsewhere, sterling fell 0.4 percent to one-month lows in early trade to $1.3063 as investors worried about the rising political uncertainty.

Divisions over the future of British Prime Minister Theresa May burst into the open on Friday, with allies saying she should carry on and a former Conservative Party chairman claiming the support of 30 lawmakers for a plot to topple her.

Oil markets wary as another tropical storm heads for Gulf of Mexico

Oil markets were cautious on Friday as traders monitored a tropical storm heading for the Gulf of Mexico and as China remained closed for a week-long public holiday.

But the prospect of extended oil production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia helped support prices.

U.S. West Texas Intermediate (WTI) crude (CLc1) was trading at $50.63 per barrel at 0650 GMT, down 16 cents from its last close. Brent crude (LCOc1) was down 12 cents at $56.88 a barrel.

Activity was subdued due to the Golden Week holiday in China and because traders were monitoring tropical storm Nate, which has triggered U.S. Gulf production and refinery closures just weeks after several hurricanes pummeled the region.

Traders said they were closing positions ahead of the expected arrival of the storm as they did not want to be caught with open trades over the weekend.

The Louisiana Offshore Oil Port, one of the most important fuel handling facilities in the Gulf of Mexico, said on Friday that it had suspended vessel offloading operations.

Storm Nate, which the U.S. National Hurricane Center said could intensify into a hurricane, is off the coast of Nicaragua, heading into a region of the Gulf populated by offshore oil platforms that pump more than 1.6 million barrels of crude per day (bpd), or about 17 percent of U.S. output.

BP (L:BP) and Chevron (N:CVX) were shutting production at all Gulf platforms, while Royal Dutch Shell (L:RDSa) and Anadarko Petroleum (N:APC) suspended some Gulf activity.Exxon Mobil (N:XOM), Statoil (OL:STL) and other producers have withdrawn personnel from their platforms.

Phillips 66 (N:PSX) on Thursday night was shutting its 247,000 bpd Alliance refinery in Louisiana.

Despite this, crude was not far off closing levels on Thursday, when prices rose by around 2 percent on the prospect of an extended production cut deal.

King Salman of Saudi Arabia, OPEC's de-facto leader, met with Russian President Vladimir Putin in Moscow on Thursday to discuss, among other things, oil policy.

Saudi Arabia made no firm pledge to extend a deal between OPEC, Russia and other producers on cutting supplies but said it was "flexible" regarding suggestions to prolong the pact until the end of 2018.

A deal to cut around 1.8 million bpd in production has been in place since January and is due to expire at end-March 2018.

With the prospect of extended cuts, analysts were raising price forecasts.

"We have grown increasingly bullish in our outlook on Brent, revising up our 2018 annual average forecast to $57 per barrel and our longer-term outlook to $73 per barrel by 2022, from $55 per barrel and $70 per barrel previously," BMI Research said.

Dollar cements gains after rally; ECB minutes eyed

The dollar edged higher against a basket of currencies on Thursday as investors consolidated positions after a recent rise, with minutes from the European Central Bank's latest meeting likely to be the key event of the day.

Despite a raft of dollar positive news in recent days ranging from positive economic data to potential U.S. tax reforms, the greenback has gained less than 3 percent over the last month against a broad basket of currencies (DXY).

Gavekal strategists said any major U.S. tax reform or significant changes in Chinese policy at the upcoming party Congress in Beijing after it cut reserve requirements over the weekend, could be the catalyst for more dollar gains.

The dollar index against a group of six major currencies (DXY) edged 0.1 percent higher to 93.50.

This week's data showed U.S. service sector growth hit its fastest in 12 years in September and private employers added more jobs than forecast despite hurricanes Harvey and Irma.

Higher U.S. Treasury yields also pushed the dollar higher. Ten year yields (US10YT=RR) have climbed nearly 30 basis points over the last month to 2.34 percent. Morgan Stanley(NYSE:MS) strategists said yields "were trading at crucial levels with a break of 2.39 percent leading yields higher".

The euro edged higher to $1.1773 , in sight of a six-week low of $1.1695 hit earlier this week.

The immediate focus was on minutes of the European Central Bank's September policy meeting due at 1130 GMT.

The ECB signaled at the meeting that while it could announce a plan this month for a gradual exit from its very easy monetary policy, it was in no hurry to end it.

The euro zone's central bank also mentioned the potentially negative aspects of a strong euro at the September policy meeting, so markets will look closely at the minutes to gauge what was discussed about the currency.

Viraj Patel, an FX strategist at ING Bank in London, said any language on discussions leaning towards acceptance of a stronger euro under certain macro conditions could be a huge boost for the currency.

Oil steady as talk of new OPEC deal balances U.S. exports

Oil prices steadied on Thursday on expectations that Saudi Arabia and Russia would extend production cuts, although record U.S. exports and the return of supply from a Libyan oilfield dragged on the market.

"Oil news is contradictory," said Carsten Fritsch, analyst at Commerzbank (DE:CBKG) in Frankfurt. "OPEC and Russia are talking about extending production limits, but there's still plenty of supply with U.S. crude exports up sharply."

Brent crude (LCOc1) was up 20 cents at $56.00 a barrel by 0800 GMT. U.S. light crude (CLc1) was unchanged at $49.98.

Both crude benchmarks have fallen more than 5 percent over the last week as investors have booked profits after almost three months of gains.

Russian President Vladimir Putin said on Wednesday that a pledge by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output to boost prices could be extended to the end of 2018, instead of expiring in March 2018.

The statement came ahead of a visit by Saudi Arabia's King Salman to Moscow.

"Putin and Salman will most likely reach, but not announce, an agreement to extend the OPEC/non-OPEC production deal, though with a commitment to taper the cuts," said consultancy Eurasia Group.

The pact on cutting output by about 1.8 million barrels per day (bpd) took effect in January this year.

Despite this, other factors weighed on oil prices.

Sukrit Vijayakar at consultancy Trifecta, said these included the return to production of Libya's Sharara oilfield after an armed brigade forced a two-day shutdown.

Higher U.S. oil exports also dampened market sentiment.

The Energy Information Administration (EIA) said on Wednesday U.S. crude oil exports jumped to 1.98 million bpd last week, surpassing the 1.5 million bpd record set the previous week.

The increase has been triggered by the wide discount in U.S. crude prices against Brent , making U.S. oil attractive on world markets.

Beyond short-term market drivers, analysts at Barclays (LON:BARC) bank said future oil demand could be undermined by improving fuel-efficiency and the rise of electric vehicles (EV).

"EV uptake and increased fleet fuel-efficiency could cut oil demand by around 3.5 million bpd in 2025," the bank said. That is almost as much as major OPEC member Iran produces.

If the uptake of EVs rose to one-third of new cars by 2040, as many industry analysts expect, up from just 1 percent now, that could "affect oil demand by around 9 million bpd", Barclays said.

Hong Kong, Japanese stocks boost Asia on optimism over global growth

Japanese and Hong Kong shares led Asian stocks higher on Wednesday, supported by optimism about global growth and as the Chinese central bank's weekend move to free up liquidity boosted mainland financial stocks.

Japan's Nikkei (N225) climbed to a more than two-year peak while Hong Kong's Hang Seng Index (HSI) rose to a level not seen since May 2015. The Philippines Stock Exchange (PSI) added 0.7 percent to a record high.

Across Asia this week, trade has been generally subdued and volumes thin with China and South Korea closed for week-long holidays, while analysts cautioned against reading too much into index moves.

However, world equities have been underpinned by upbeat global data, including strong manufacturing activity across much of Asia, Europe and the United States, largely reflecting a broad export boom.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) climbed 0.3 percent to extend four straight days of gains.

"Global growth is on the up," said Greg McKenna, Sydney-based chief market strategist at AxiTrader. "That's a positive for stocks even before we add in the stimulatory impact of possible tax cuts or infrastructure spending in the United States."

China - the world's No.2 economy - has held up remarkably well this year, thanks to a construction-boom and surge in exports.

The Chinese central bank on Saturday cheered investors by cutting the amount of cash that some banks must hold as reserves for the first time since February 2016.

Analysts say the move by the People's Bank of China should support banks' net interest margins and profit growth in 2018.

Predictably, financials lifted the Hong Kong China Enterprises Index (HSCE), which soared to the highest since August 2015. China Construction Bank (HK:0939) and Industrial and Commercial Bank of China (HK:1398) were among top gainers.

Asia already had a strong tailwind from buoyant U.S. shares, with the three major stock indices on Wall Street closing at record highs on Tuesday.

Car sales in the world's biggest economy grew at the fastest pace in 12 years as Americans rushed to replace cars lost to hurricanes in Texas and Florida in recent weeks.

The car-buying spree will boost new and used auto sales through at least November, according to industry consultants.

That will hoist retail sales, adding to the country's gross domestic product and more than offsetting the drag from damage done by the hurricanes, analysts said.

Britain's top share index FTSE 100 (FTSE) is set to open steady, according to spreadbetters, with futures (FFIc1) a touch softer ahead of cash market open.

FED MUSICAL CHAIR

In currencies, the dollar eased 0.2 percent on the yen <JPY=> to 112.61. The dollar index(DXY), which tracks the greenback against a basket of six major currencies, slipped 0.18 percent to 93.405.

The foreign exchange market is at a crossroad with uncertainty over the likely successor of Federal Reserve Chair Janet Yellen whose term ends in February. Fed Governor Jerome Powell has joined the race for the job alongside his predecessor Kevin Warsh.

"The market is still seeing Warsh as a favourite but the odds for Powell have improved. Powell is perceived as being a relatively dovish choice compared to Warsh," said Ray Attrill, Sydney-based global co-head of forex strategy at National Australia Bank.

As a result, Treasury yields headed lower to 2.3120 percent from a near three-month peak of 2.3710.

Elsewhere, investors remained cautious over Catalonia's vote to separate from Spain with the region's secessionist leader saying he would declare independence "in a matter of days".

"The Constitutional Court is likely to challenge and rule against such a motion," analysts at Citi wrote in a note.

"If the Catalan government ignores the ruling, then Madrid is likely to trigger article 155 of the Constitution to strip out Catalonia's autonomy and to call for regional elections."

Catalans had come out in hordes to vote for independence on Sunday in a referendum that was declared illegal by Spain's central government.

In commodities, U.S. crude (CLc1) dipped 0.75 percent at $50.04 a barrel on caution that a rally that lasted for most of the third quarter would not extend through the last three months of the year. Brent crude (LCOc1) fell to $55.62 per barrel.

Oil prices dip over doubts that recent rally will last

Oil prices eased on Wednesday, pulled down by caution that a rally that lasted for most of the third quarter would not extend through the last three months of the year.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) were at $50.16 per barrel at 0648 GMT, down 26 cents, or 0.5 percent, from their last close. They fell below $50 per barrel earlier in the session.

Brent crude futures (LCOc1) were down 22 cents, or 0.4 percent, at $55.78 a barrel.

The drops came over concerns that a third-quarter market rally that had lifted Brent to mid-2015 highs by late September had been overdone.

"Fundamentals may not yet be strong enough to support a continued rally, especially in growth-dependent commodities such as oil," said Ole Hansen, head of commodity strategy at Denmark's Saxo Bank in a quarterly outlook to investors.

Traders said that a so-called market rebalancing is now well underway, meaning that demand is no longer undershooting available supply.

The re-balancing is a result of strong consumption and also due to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output by around 1.8 million barrels per day (bpd) in 2017 and the first quarter of next year.

"Compliance with the OPEC production cuts was over 100 percent in August (meaning members produced less than their quotas, on average) and U.S. oil inventories have been declining for several months now," said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

But rising production in the United States, which is not participating in the deal to cut output, has prevented prices from climbing further.

U.S. production hit 9.55 million bpd in late September, its highest level since July 2017 and not far off its 9.61 million bpd record from June 2015.

"The number of active drilling rigs in the U.S. increased last week, highlighting the fact that higher oil prices will inevitably lead to more production from U.S. shale. These factors have kept WTI oil in a relatively tight trading-range for several months now," O'Loughlin wrote in a note to clients.

Drillers added six oil rigs looking for new production in the week to Sept. 29, bringing the total count up to 750, according to energy services firm Baker Hughes.

Due largely to rising U.S. output, Saxo Bank's Hansen said that "an extension of output curbs beyond March (2018) will be needed to ensure continued support for the oil market".

Traders said they would be watching for fuel inventory data from the U.S. Energy Information Administration (EIA), due to be published later on Wednesday, for further market guidance.