Oil Edges Up From One-Week Low As IEA Sees Tighter Market
NEW YORK, Jan 19 (Reuters) - Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect.
The IEA said that while it was "far too soon" to gauge OPEC members' compliance with promised cuts, commercial oil inventories in the developed world fell for a fourth consecutive month in November, with another decline projected for December.
Brent crude ended the session at $54.16 per barrel, up 24 cents or 0.45 percent after closing down 2.8 percent in the previous session. U.S. crude settled 29 cents, or 0.57 percent, higher at $51.37 a barrel, having dropped to a one-week low on Wednesday of $50.91.
A stronger U.S. dollar also limited oil's advance.
Prices tumbled to session lows after U.S. Energy Information Administration (EIA) data showed crude inventories rose unexpectedly last week as refineries sharply cut production.
The data also showed much larger-than-expected builds in gasoline with inventories of the motor fuel on the U.S. East Coast swelling to the highest weekly levels on record for this time of year, when refiners typically begin storing barrels ahead of summer driving season.
Oil prices have gyrated this year, as hopes for output cuts by the Organization of the Petroleum Exporting Countries and other producers have alternated with fears of a sharp rebound in U.S. shale production.
"Oil speculators appear caught between rising U.S. production and inventories, and news flow from OPEC, which seems to indicate production cuts are in place," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
"In our view, U.S. production gains mitigate oil production cuts amongst other oil producers, limiting potential oil market gains."
The head of the IEA, Fatih Birol, said in Davos, Switzerland, that he expected U.S. shale oil output to rebound by as much as 500,000 barrels per day over the course of 2017, which would be a new record.
OPEC, which is cutting oil output alongside independent producer Russia, wants a lasting partnership with Moscow, Saudi Energy Minister Khalid al Falih told Reuters. He said the deal need not be extended for a full year if the market rebalances.
The IEA sharply raised its 2016 demand growth estimate, and said the data indicated that rising demand was slowly tightening global oil markets.
Still, analysts said OPEC and other producers must cut output as promised, as a resilient U.S. shale industry could add barrels to the market.
"Discipline and strict adherence to the new quotas will be needed probably throughout 2017 and beyond to see the long-awaited and sustainable rebalancing finally arrive," PVM Oil Associates analyst Tamas Varga said.
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