Oil jumps to five-month high on forecasts that glut will recede

Oil prices rise for 3rd straight session as IEA reports drop in global supply

Brent crude prices have steadied above $55 a barrel after gaining ground yesterday on a report by the International Energy Agency (IEA) that predicted stronger demand for oil.

Oil demand for 2017 will expand by the most in two years, the Paris-based IEA said on Wednesday.

The report said its collective production was 32.76 million barrels a day last month, more than 79,000 barrels less than July. Oil topped US$50 (RM209) a barrel for the first time and closed at a six-week high amid heightened optimism that a demand resurgence is in the offing.

Iran's crude oil output last month nearly remained unchanged from July, data by OPEC showed on Tuesday, as production cuts by most members of the Organization of Petroleum Exporting Countries outweighed additional supplies, particularly those of Nigeria.

The IEA said OPEC crude production fell in August for the first time in five months, thanks to both cuts in production as well as a flare-up in turmoil in Libya disrupting output.

West Texas Intermediate crude was up 1.6% to $50.11 a barrel on Thursday, trading above $50 for the first time since August 10.

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As well, weekly data from the U.S. government's Energy Information Administration (EIA) revealed a smaller-than-expected rise in crude supplies, a hefty drop in gasoline (petrol) stockpiles and a jump in domestic output as production in the Gulf of Mexico and along the Texas coast around Houston recovered in the wake of Hurricane Harvey.

"Another optimistic indicator going forward is global oil demand growth". On May 25, OPEC and non-OPEC nations agreed to extend the existing level of oil production cut (1.8 mln barrels daily) until April 2018. IEA's oil and market division head Mr. Neil Atkinson told CNBC that "pretty robust" demand showed that a rebalancing of the market is "underway".

If these weren't enough, the U.S. Energy Information Administration lowered its oil production forecast for this year and the next by 1% and 0.7%, respectively.

Oil is higher for the fourth day in a row as the United States refinery industry restarts after Harvey.

Barkindo said the drop in global oil prices was the sharpest ever experienced.

"Stronger demand and supply restrictions from OPEC and Russian Federation are the main reasons for the oil price upsurge", said Forex.com analyst Fawad Razaqzada.

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