NEW YORK: Oil prices on Thursday were on track to hit their highest closes since early March after sources said OPEC and Russia agreed to a modest output increase from January by 500,000 barrels per day. The increase means the Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+, would move to cutting production by 7.2 million bpd, or 7% of global demand from January, compared with current cuts of 7.7 million bpd.

The OPEC+ producers, however, failed to find a compromise on a broader and longer term policy for the rest of next year. Brent futures rose 63 cents, or 1.3%, to $48.88 a barrel by 1:01 p.m. EST (1801 GMT). US West Texas Intermediate (WTI) crude rose 49 cents, or 1.1%, to $45.77.

That puts both benchmarks on track to close at their highest levels since March 5 - before most countries imposed lockdowns to stop the spread of coronavirus. OPEC+ met on Thursday to work on policies for 2021 after talks earlier in the week reached no conclusion on how to tackle weak oil demand amid a new coronavirus wave.

OPEC+ had been widely expected to roll over oil cuts of 7.7 million bpd, or 8% of global supplies, at least until March 2021. But after hopes for a speedy approval of Covid-19 vaccines spurred a rally in oil prices at the end of November - Brent futures gained 27% in November - some producers questioned the need to tighten oil policy.

Those higher prices in November prompted US producers to boost output for a third week in a row last week for the first time since June 2019, reaching 11.1 million bpd, according to government data.

"With US oil output on the rise, OPEC+ couldn't allow the Americans to win market share at their expense," said Edward Moya, senior market analyst at OANDA in New York.

The premiums of front-month Brent and WTI over the same month in 2022, meanwhile, reached their highest since February 2020, signalling future price uncertainty.

Four OPEC+ sources said the group would now gather every month to decide on output policies beyond January and monthly increases are unlikely to exceed 500,000 bpd. Monthly meetings by OPEC+ will make price moves more volatile and complicate hedging by US oil producers.