Oil prices on Wednesday climbed for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts should create a crude deficit in the first half of 2017, Reuters reported.
Data from the U.S. Energy Information Administration (EIA) showed U.S. crude stocks fell last week, the first weekly decline after nine consecutive increases.
Crude inventories USOILC=ECI fell 237,000 barrels in the week to March 10. Analysts had forecast an increase of 3.7 million barrels. [EIA/S]
The IEA said global inventories rose in January for the first time in six months despite OPEC output cuts, but oil prices still drew support from the monthly report which said if the cartel sticks to production curbs, the market should see a deficit of 500,000 barrels per day (bpd) in the first half. [IEA/M]
"For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve," the IEA said.
Brent LCOc1 futures were up 64 cents, or 1.3 percent, at $51.56 a barrel by 1:15 p.m. EDT (1715 GMT), its first increase in seven days. The global benchmark on Tuesday settled at its lowest level since Nov. 30.
U.S. West Texas Intermediate (WTI) crude CLc1 was up 76 cents, or 1.6 percent, at $48.48 per barrel, its first increase in eight days. U.S. crude slid on Tuesday to its lowest since Nov. 29, erasing all its gains since the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut crude output.
Even with Wednesday's price rise, Brent and WTI both remained in technically oversold territory for a sixth day, their longest such streaks since November.
OPEC said on Nov. 30 it would cut 1.2 million bpd during the first half of 2017, and on Dec. 10 that non-OPEC producers would cut about 600,000 bpd from their output. Brent spiked above $58 in early January.
Yet despite OPEC compliance with its share of the cuts, stockpiles have kept rising, partly because OPEC members pumped heavily before cuts kicked in and also because U.S. shale producers have raised output.
Last week, futures prices plummeted more than 8 percent, their biggest declines since early November, as U.S. crude inventories surged much more than expected to a record high.
While the IEA's advice to wait for OPEC output cuts to reduce the crude supply glut "may indeed benefit longer-term investors, it may not be much help for money managers facing year-to-date losses on long positions," Tim Evans, Citi Futures' energy futures specialist, said in a note.
"Surplus inventories and rising U.S. production may be more of a worry to them."