By Christopher Alessi
LONDON--Oil prices continued to climb Thursday morning, building on solid gains made Wednesday on shrinking global inventories and a bullish forecast for demand.
Brent crude, the global benchmark, was up 0.38%, at $55.37 a barrel in London midmorning trading. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up around 0.51%, at $49.55 a barrel.
The International Energy Agency on Wednesday said global oil supplies dropped for the first time in four months in August, by 720,000 barrels a day, while raising its oil demand growth forecast to 1.6 million barrels a day for the full year.
Brent settled up 1.6% Wednesday, at $55.16 a barrel, its highest level since mid-April. WTI, which had languished in the aftermath of Hurricane Harvey, hit a one-month high of $49.30 a barrel Wednesday.
"Prices have risen this week as the IEA paints a bullish, immediate short-term picture," said James Davis, an upstream analyst at research consultancy Facts Global Energy. But he cautioned that the agency's picture for 2018 "still looks relatively bearish."
The IEA report came on the heels of a bullish monthly report from the Organization of the Petroleum Exporting Countries, which said the cartel's output had fallen in August for the first time since April. The decline was primarily driven by a precipitous drop in Libyan production following renewed civil unrest, as well higher compliance with an OPEC agreement to rein in output.
OPEC and 10 producers outside the cartel first agreed late last year to cap production at around 1.8 million barrels a day lower than peak October 2016 levels, part of an effort to alleviate the global oil glut and boost prices. But the deal, which was extended in May through March 2018, hasn't had as significant an impact on the market as hoped.
That is partly because of a continued surge in U.S. shale production, along with unexpected spikes in production from Libya and Nigeria--two OPEC members exempt from the deal because their oil industries had been disrupted by political instability.
OPEC and non-OPEC signatories to the deal have been discussing whether to extend the cuts past the March deadline. While those talks are a "welcome step," an extension is unlikely to be particularly effective without caps on Libyan output that would bring down absolute production, according to Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. "At the current level, rebalancing will remain slow and painful," Mr. Varga wrote in a note Thursday.
Meanwhile, the U.S. Energy Information Administration said Wednesday in its weekly report that U.S. gasoline stockpiles came down by 8.4 million barrels in the week ended Sept. 8, the largest weekly drop on record. Crude stockpiles rose by 5.9 million barrels during the same week, a result of lagging demand from recovering refineries in the wake of Harvey.
Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was down 0.40% at $1.5939 a gallon. ICE gasoil, a benchmark for diesel, changed hands at $528 a metric ton, up 0.33% from the previous settlement.
Write to Christopher Alessi at [email protected]