SINGAPORE (Reuters) – Oil prices rose on Thursday, lifted by renewed signs of a gradually tightening U.S. market, although ongoing high supplies from producer club OPEC still weighed.
Brent crude futures, the international benchmark for oil prices, were at $52.56 per barrel at 0903 GMT, up 20 cents, or 0.4 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $49.79 per barrel, up 20 cents, or 0.4 percent.
Strong demand in the United States was supporting prices, as the U.S. Energy Information Administration (EIA) reported record gasoline demand of 9.84 million barrels per day (bpd) for last week, and a fall in commercial crude inventories of 1.5 million barrels to 481.9 million barrels,
That’s below levels seen this time last year, an indication of a tightening U.S. market.
But traders say high production by the Organization of the Petroleum Exporting Countries is capping prices.
OPEC and other producers including Russia have promised to restrict output by 1.8 million bpd until March 2018 to help support prices and draw down inventories.
Yet OPEC output hit a 2017 high of 33 million bpd in July, up 90,000 bpd from the previous month, a Reuters survey showed earlier this week, led by a further recovery in supply from Libya, one of the countries exempt from a production-cutting deal.
Ample supply is likely to keep a cap on prices for some time to come, analysts say.
“Our view of the oil market is that a major rally is unlikely in 2017,” National Australia Bank analysts said in a note to clients.
“Absent further production cuts or a sustained uptick in demand, prices are likely to remain in the low to mid $50s for the remainder of the year.”
There are signs that the oil industry has adapted to an era of low prices and can produce and operate at levels that would previously have been uneconomic.
“Of the major projects sanctioned by the big five oil companies (ExxonMobil, Royal Dutch Shell, Chevron, BP and Total) over H1 2017, there has been a clear breakeven target price of $40 per barrel or lower at offshore oil projects,” BMI Research said.
U.S. investment bank Goldman Sachs said this week that the oil industry had successfully adapted to oil prices around $50 per barrel.
Additional reporting by Christopher Johnson in London