Oil prices rose for a second day on Thursday, closing more than 1 percent higher as support grew for OPEC output cuts a day after the U.S. government reported a big draw in crude inventories, boosting confidence that a global glut might diminish, Reuters reported.
U.S. light crude oil CLc1 ended the day up 50 cents, or 1.6 percent, at $47.83. Brent LCOc1 settled at $50.77, up 55 cents or 1.1 percent. It was the highest closing price in a week for both benchmarks.
On Wednesday, the U.S. Energy Department reported that U.S. crude stockpiles posted their biggest weekly drawdown since December as imports dropped sharply. Inventories of refined products also fell.
"People are hinging the optimism today on the recent drawdown in inventories and I think that might last as long as we don’t have another inventory build," said Stewart Glickman, head of energy research at CFRA Research in New York.
In recent days major producers like Iraq, Algeria and Kuwait have voiced support for extending last year's deal from the Organization of the Petroleum Exporting Countries and other producers to cut supply by almost 1.8 million barrels per day (bpd).
On Thursday, non-members Turkmenistan and Equatorial Guinea said they would also join the cuts, though they are smaller producers.
On May 25, OPEC will meet to determine policy for the second half of 2017. Most analysts expect the group to extend cuts until at least year-end. If they don't, Glickman said, "they’ll take the floor out from oil prices."
OPEC said Thursday that group production fell in April. Despite the reduction, there are few signs that supply has fallen significantly as other producers have continued to supply key customers, especially in Asia.
OPEC also said it sees more supply coming from non-member countries such as the United States. The cartel raised its estimate of total oil supply growth from non-OPEC producers this year to 950,000 bpd from a previous forecast of 580,000 bpd.
U.S. oil production C-OUT-T-EIA rose to more than 9.3 million bpd last week, highest since August 2015. Even with this week's drawdown in U.S. crude stocks, Glickman said the country has a way to go to reduce oversupply.
“You’re going to have to have a few weeks of 5 million-barrel draws just to get back to square one," he said.