Oil prices climbed 1 percent on Thursday, after data showed inventory declines in the United States and as investors began to expect that the global oil market could have a deficit sooner than they had previously thought.
OPEC's output agreement with Russia and Canada's decision to mandate production cuts could create an oil market supply deficit by the second quarter of next year, if top producers stick to the deal, the International Energy Agency said in its monthly Oil Market Report.
US crude inventories at Cushing, Oklahoma, the delivery point for US crude futures, fell by nearly 822,000 barrels in the week through Dec. 11, traders said, citing data from market intelligence firm Genscape.
Brent crude was up 57 cents, or 1 percent, at $60.72 per barrel by 12:02 p.m. EST (1702 GMT). U.S. light crude was 79 cents higher, or 1.5 percent, at $51.94 a barrel.
"The market over the last week has attempted to stabilize and I still think that's what is happening today," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
"For further weakness in the market you need to see even stronger signs that demand growth is going to deteriorate and supply will continue to increase."
Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil's price at the end of November to its lowest in more than a year.
But the Organization of the Petroleum Exporting Countries and other big producers including Russia said last week they agreed to cut production by 1.2 million barrels per day (bpd).
Still, oil demand growth is slowing, OPEC said.
OPEC said on Wednesday that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd below what it currently produces.
Iranian Oil Minister Bijan Zanganeh said his country has no plans to reduce its oil production, but will remain a member of OPEC, the official news agency IRNA reported.
Factors such as production cuts and output losses elsewhere should keep markets tight in the first half, Jefferies analyst Jason Gammel said. But he added that US production growth "will almost inevitably re-accelerate in 2H19 as incremental pipeline capacity is installed in the Permian Basin. This means that by early 2020 the market could move back into oversupply."
The United States, where weekly crude production has hit a record, is set to end 2018 as the world's top oil producer, ahead of Russia and Saudi Arabia.
"Global supply and demand should reach a fine balance next year with the market ebbing and flowing on either side of equilibrium compared to trending for prolonged periods of over and undersupply as seen since the turn of the decade," RBC Capital Markets analysts wrote in a note.
"Whether that is enough to bring apprehensive investors back to the table remains the topic du jour."
First Published: IST