Oil jumped above $48 a barrel on Wednesday, July 12, in response to a drop in U.S. fuel inventories and a cut in the U.S. government’s forecast for crude output next year which raised hopes that a supply glut is easing.
U.S. crude inventories fell by 8.1 million barrels, industry group the American Petroleum Institute said on Tuesday, much more than the forecast.
Official inventory data from the Energy Information Administration is due at 1430 GMT.
Brent crude, the global benchmark, was up 86 cents, at $48.38 a barrel by 0824 GMT. U.S. crude gained 93 cents to $45.97.
“While further upside could be expected in the short term amid the speculations of a cut in U.S production, gains may be limited by the firm oversupply dynamics of the markets,” FXTM analyst Lukman Otunuga said.
The U.S. crude stocks drop will raise hopes that a long-awaited market rebalancing is under way. A supply glut has stuck around for three years, despite an OPEC-led output cut in 2017, keeping oil at less than half its price of mid-2014.
Also supporting prices, the EIA said on Tuesday it expected U.S. crude oil production to rise by less than previously forecast next year due to a lower price outlook.
The lower 2018 forecast of 9.9 million barrels per day will ease concerns that the OPEC-led supply cut will lead to a flood of competing U.S. shale supplies, swamping the OPEC effort.
Still, output of 9.9 million bpd would be a record for U.S. production.
The supply cut led by the Organization of the Petroleum Exporting Countries has lent prices some support, but in recent weeks rising output from Libya and Nigeria – OPEC members exempt from the deal – has pushed supply higher.
OPEC production has risen in June by more than 300,000 barrels per day, (bpd) according to figures seen by Reuters that the exporter group uses to monitor its supply, as more oil from the exempt countries countered high compliance by many others.
Top exporter Saudi Arabia plans to export less. A Saudi industry source said on Wednesday Riyadh planned to cut shipments in August by more than 600,000 bpd, taking exports for that month to their lowest level this year, to balance a seasonal rise in domestic use.
The latest OPEC monthly report, containing June production figures, is scheduled to be published later on Wednesday, Reuters reports.