By Sarah McFarlane, Alison Sider and Jenny W. Hsu
Crude futures continued to rise Thursday on indications of better-than-expected gasoline demand in the U.S. and as investors anticipate fresh data on OPEC's compliance with production cuts.
U.S. crude futures rose 66 cents, or 1.26%, to $53.00 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 50 cents, or 0.93%, to $55.63 a barrel.
Oil prices got a boost from Energy Information Administration data published Wednesday showing gasoline inventories in the U.S. fell by 0.9 million barrels in the most recent week, upending an expectation for an increase and pointing to improving demand of the fuel.
"The fall in gasoline stocks eased concerns among traders that had been growing over recent weeks," said ANZ Research.
Crude inventories gave a more bearish signal. Data showed that while the latest growth in U.S. crude stocks came below market expectations, it still expanded by 13.8 million barrels, the second largest weekly increase on record, on rising imports and domestic production.
Analysts attributed the increase in part to a late 2016 surge in shipments from Saudi Arabia and other countries ahead of the production cuts initiated in January, and many expect that U.S. inventories will begin to drop as those cuts materialize.
"As production cuts work their way through the system and eat into the inventory overhang, that's going to be supportive in the long run," said Gene McGillian, research manager for Tradition Energy.
Goldman Sachs said that data indicated around 85% compliance to the production cuts which were applied from the start of the year.
"This suggests that while U.S. crude imports are currently surprising to the upside, these should sequentially decline once the lower loadings impact U.S. arrivals," the bank said in a note, adding that as average Persian Gulf to U.S. Gulf Coast shipping time is 47 days, arrivals should slow by early March.
Market participants are turning their attention to upcoming reports from the International Energy Agency and OPEC, which will provide a clearer picture of how closely producers are sticking to their reduced output targets. The IEA is expected to release its monthly oil market report Friday.
"Everyone is afraid they're going to miss a bigger up move up" on evidence that compliance with the agreement has been good, said Jim Ritterbusch, president of Ritterbusch & Associates.
Scotiabank analysts said prices could "find a modest push higher" if new data confirms that the supply cuts are happening.
Even with Thursday's rally, crude prices remained range-bound, hemmed in by the prospect of rising U.S. production that could limit further price increases.
The latest EIA data also showed U.S. crude production increased by 63,000 barrels a day last week to 8.98 million barrels. The rising trend in U.S. crude production is one of the most pressing threats to an effort by other producers to reduce global supply. The Organization of the Petroleum Exporting Countries and 11 other heavyweight producers, such as Russia, late last year pledged to trim production by 1.8 million barrels a day to support prices.
"It isn't OPEC alone calling the tune, it is OPEC as well as U.S. shale producers," said Ehsan Ul-Haq, analyst at U.K. consultancy KBC Advanced Technologies. "These cuts were agreed for six months and I don't think the market will rebalance if cuts aren't extended."
Gasoline futures rose 1.75 cents, or 1.13%, to $1.5502 a gallon. Diesel futures rose 0.55 cent, or 0.34%, to $1.6415 a gallon.
Write to Sarah McFarlane at firstname.lastname@example.org, Alison Sider at email@example.com and Jenny W. Hsu at firstname.lastname@example.org
(END) Dow Jones Newswires
February 09, 2017 16:30 ET (21:30 GMT)
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