Oil prices rose on Thursday, with signs of a tightening U.S. market spurring cautious buying by investors despite high crude supplies from producer club OPEC.
Benchmark Brent crude was up 43 cents at $52.79 a barrel by 11:38 a.m. EDT (1638 GMT). U.S. light crude was 20 cents higher at $49.79.
“Five weeks of crude draws is lending some credence to the idea that the OPEC cut is beginning to impact the market,” said Gene McGillian, manager of market research at Tradition Energy in Stamford. Still, U.S. light crude has remained below $50 a barrel, capped by robust domestic supplies.
“The market needs continuing signs of improvement in the inventory picture to really drive the prices higher,” he said.
Strong demand in the United States has been supporting prices. The U.S. Energy Information Administration reported record gasoline demand of 9.84 million barrels per day (bpd) for last week and a fall in commercial crude inventories of 1.5 million barrels to 481.9 million barrels .
That was below levels seen this time last year, an indication of a tightening U.S. market.
But traders said high production by the Organization of the Petroleum Exporting Countries was limiting price gains.
OPEC and other producers including Russia have promised to restrict output by 1.8 million bpd until the end of March 2018 to help support prices and draw down inventories.
Yet OPEC output hit a 2017 high of 33 million bpd in July, up 90,000 bpd from the previous month, a Reuters survey showed this week, led by a further recovery in supply from Libya, one of the countries exempt from the deal.
OPEC crude oil exports rose to a record high in July, driven largely by soaring exports from the group’s African members, according to a report by Thomson Reuters Oil Research.
Ample supply is likely to keep a lid on prices, many analysts said.
“Our view of the oil market is that a major rally is unlikely in 2017,” National Australia Bank analysts said in a note. “Absent further production cuts or a sustained uptick in demand, prices are likely to remain in the low to mid $50s for the remainder of the year.”
There are signs that the oil industry has adapted to an era of low prices and can produce and operate at levels that would previously have been uneconomic.
U.S. investment bank Goldman Sachs said this week the oil industry had successfully adapted to oil prices around $50 per barrel.