By Stephanie Yang and Sarah McFarlane
Oil prices rose to a one-month high Wednesday, supported by a record drop in gasoline inventories and signs that market supply and demand are coming back into balance.
Light, sweet crude for October delivery gained $1.07, or 2.2%, at $49.30 a barrel on the New York Mercantile Exchange, closing out the third straight session of gains. Brent, the global benchmark, settled up 89 cents, or 1.6%, to $55.16 a barrel, the highest since April 17.
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.
The U.S. Energy Information Administration also reported that gasoline stockpiles fell by 8.4 million barrels in the week ended Sept. 8, the largest weekly drop on record in EIA data going back to 1990. Stocks of distillates decreased by 3.2 million barrels, also exceeding analyst expectations.
Crude stockpiles rose by 5.9 million barrels last week, less than estimates from the American Petroleum Institute for a build of 6.2 million barrels.
"To a degree that's not too surprising...as those refinery recovery efforts continue to be under way," said Tony Headrick, an analyst at CHS Hedging.
The arrival of Hurricane Harvey in Texas knocked out more than 20% of the nation's refining capacity at the start of the month, as refiners shut down operations due to rain and flooding.
According to the latest EIA data, refineries operated at 77.7% of their operable capacity last week, which could mean another large build in crude inventories this week, analysts said. Oil prices gave back some gains following the report, as traders continued to assess the impact of hurricanes Harvey and Irma on levels of supply in the energy market.
U.S. crude production bounced back quickly following the storm, analysts noted, which could exacerbate oversupply as companies continue to pump out crude while demand stalls.
However, reports from the IEA and the Organization of the Petroleum Exporting Countries this week outweighed any negative signs in the EIA data Wednesday.
"You've still got some love in the market from the IEA report," said Bob Yawger, director of the futures division at Mizuho Securities USA. "The international reports were all rather supportive of the market."
In its monthly report released Tuesday, OPEC 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.
Gasoline futures fell 0.5% to $1.6473 a gallon and diesel futures rose 1.6% to $1.7685 a gallon.
Write to Stephanie Yang at [email protected] and Sarah McFarlane at [email protected]