Oil rises after IEA finds market is nearing balance

April 13, 2017 10:06 AM

Oil prices edged higher on Thursday after the International Energy Agency (IEA) said the market was nearing balance, while U.S. data showing higher production kept gains in check.

Benchmark Brent crude futures were up 20 cents at $56.06 a barrel at 1216 GMT, on track for their third straight weekly gain after touching a one-month high on Wednesday.

U.S. West Texas Intermediate crude futures were up 16 cents at $53.27 a barrel, also set for their third consecutive weekly gain.

The Paris-based IEA said on Thursday that it sees the global oil market as close to balancing after a fall in stockpiles in developed countries in March.

The market has been oversupplied for three years and members of the Organization of the Petroleum Exporting Countries, as well as some non-OPEC producers, have agreed to slash output to rein in the glut.

Latest OPEC data showed members had cut March output beyond what they had promised. 

OPEC meets on May 25 to consider whether to extend the supply cut beyond June. Most members, including Saudi Arabia and Kuwait, are leaning towards this if other producers, including those outside the group, also agree, OPEC sources told Reuters last month.

Capping gains on Thursday were fresh data showing U.S. production continued to climb, potentially undermining the OPEC-led supply cut. 

The weekly U.S. government data also showed an unexpected drop in U.S. crude oil stocks and a decline in gasoline and distillate inventories, adding to more bullish sentiment.

"We see the weekly inventory and U.S. production data being an important oil price driver but it conflicts with the OPEC signals," said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam. 

"We will see some sideways trading in the coming weeks."

The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day "could prove optimistic".

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Karolin Schaps, Reuters