By Sarah McFarlane
Oil prices nudged higher on Wednesday, supported by signs that the global oil market is tightening with supplies falling and demand growth remaining strong.
Brent crude, the global oil benchmark, rose 0.5% to $54.56 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.6% at $48.53 a barrel.
Earlier on Wednesday the International Energy Agency said global oil supplies fell for the first time in four months in August, while also revising its 2017 oil demand estimate up to 1.6 million barrels a day from its July estimate of 1.5 million.
The IEA said that commercial oil inventories in the Organization for Economic Cooperation and Development, or OECD, stayed flat in July month-on-month, at 3.016 billion barrels, about 190 million barrels above their five-year average.
"The overall message from the IEA is constructive for the time being, they have very strong oil demand growth," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "If you look at their numbers from March to July, inventories in the OECD, accounting for seasonality, have been going down."
On Tuesday the Organization of the Petroleum Exporting Countries in its monthly report said its production fell for the first time since April. The cartel, in cooperation with other oil producers including Russia, set production quotas since January in an effort to drain the global overhang of supply.
Analysts cautioned that global oil stocks are expected to build in 2018, however. Stephen Brennock, analyst at brokerage PVM, said that OPEC was likely to fall short of its goal of reducing oil stocks to their five year average by the end of the first quarter of 2018, when the deal on production controls is set to expire.
"As a result, an extension of its production pact beyond the current March 2018 deadline is all but guaranteed," Mr. Brennock said.
Investors anticipated a rise in U.S. crude inventories ahead of official data due later on Wednesday.
Traders and analysts surveyed by The Wall Street Journal expect on average to see U.S. oil stockpiles to have risen by 3.7 million barrels in the week ended Sept. 8.
Industry group the American Petroleum Institute reported Wednesday that U.S. crude supplies rose 6.2 million barrels for the week ended Sept. 8, while gasoline stockpiles fell by 7.9 million barrels.
Oil inventories are expected to have increased because of the slowdown in demand caused by disruptions to refineries from August's Hurricane Harvey.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.1% to $1.66 a gallon. ICE gasoil changed hands at $516.00 a metric ton, down $2.00 from the previous settlement.
Write to Sarah McFarlane at [email protected]