Oil bounced back from a one-week low on Thursday as the International Energy Agency (IEA) said global oil markets were tightening even before cuts promised by OPEC and other producers could take shape.
Oil prices have gyrated this year as the market’s focus has swung from hopes that oversupply may be curbed by output cuts announced by the Organization of the Petroleum Exporting Countries (OPEC) and others producers to fears that a rebound in U.S. shale production could swamp any such reductions.
Brent crude, the international benchmark for oil prices, was up 27 cents at $54.19 a barrel by 1015 GMT after closing down 2.8 per cent in the previous session.
U.S. West Texas Intermediate crude oil was up 25 cents at $51.33 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel.
The IEA said that while it was “far too soon” to gauge OPEC members’ levels of 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.
It raised its 2016 demand growth estimate, and said the data indicated that rising demand was slowly tightening global oil markets.
Still, analysts warned that keeping to the cuts was crucial, particularly as a resilient U.S. shale industry threatened to add more 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 in a note.
OPEC itself said its cuts would help balance the market, and said its output had already fallen in December. But it also pointed to the possibility of a rebound in U.S. output amid higher oil prices.
Stocks data coming out of the United States sent more mixed signals. American Petroleum Institute (API) data on Wednesday showed that U.S. crude stocks fell by 5.04 million barrels in the week to Jan. 13, well above the expectations of a 342,000-barrel decline.
But the data also showed larger-than-expected, and potentially bearish, increases in stocks of gasoline and distillates.
Weekly inventory data is due from the U.S. Energy Information Administration (EIA) at 1600 GMT. It has been delayed by a day due to a U.S. public holiday on Monday.