Oil close to late-2014 highs on supply cuts, strong demand

Brent crude oil futures were at $73.79 per barrel at 04:40 GMT, up 1 cent from their last close.

U.S. West Texas Intermediate (WTI) crude futures down 2 cents at $68.40 a barrel.

Both Brent and WTI hit their highest levels since November 2014 on Thursday, at $74.75 and $69.56 per barrel respectively. WTI is set for its second weekly gain, gaining 1.3 percent this week, while Brent is also poised to rise for a second week, adding 1.6 percent this week.

Oil prices have been pushed up by a gradually tightening market.

Led by top exporter Saudi Arabia, the Organization of the Petroleum Exporting Countries (OPEC), has been withholding production since 2017 to draw down a global supply overhang that had depressed crude prices between 2014 and 2016.

"Commercial inventories in the OECD are now essentially at their 5-year average, and drawdowns likely accelerate as refineries emerge from maintenance ahead of peak seasonal demand," U.S. investment bank Jefferies said on Friday.

"OECD commercial inventories could fall back to... a level not seen since the oil price collapse that began in 3Q14. On a days of forward demand basis, we believe cover could drop below 57 days later this year, a level last seen in 2011," it added.

The tighter oil market is feeding into refined products.

"Signs of tightness are emerging in product markets as stocks saw the largest week-on-week draw since October, 2016 ... The U.S. led the draws but was also aided by draws in Singapore," said U.S. bank Morgan Stanley.

This tightness is also a result of healthy oil demand.

"Global oil demand data so far in 2018 has come in line with our optimistic expectations, with 1Q18 likely to post the strongest year-on-year growth since 4Q10 at 2.55 million barrels per day," U.S. bank Goldman Sachs said in a note published late on Thursday.

Beyond OPEC's supply management, crude prices have also been supported by an expectation that the United States will re-introduce sanctions on OPEC-member Iran.

"The first key geopolitical issue is the expiration of the current U.S. waiver of key sanctions against Iran," said Standard Chartered Bank in a note this week, referring to a deadline on May 12 when U.S. President Donald Trump will decide whether or not to re-impose sanctions.

One factor that could start weighing on prices is rising U.S. production, which has jumped by a quarter since the middle of 2016 to 10.54 million barrels per day (bpd), making the United States the world's second-biggest producer of crude oil behind only Russia, which pumps almost 11 million bpd.