Oil futures advanced on Thursday, adding to healthy gains from the prior session, after the Organization of the Petroleum Exporting Countries upgraded its global demand forecast.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September gained 28 cents, or 0.6 per cent to $49.84 a barrel. October Brent crude climbed 48 cents, or 0.9 per cent to $53.19 a barrel.
Those move extended gains of 8 per cent and 1.1 per cent for crude and brent respectively, on Wednesday after U.S. government data showed a sharp decline in oil inventory. U.S. crude oil supply fell by 6.5 million barrels to 1.15 billion barrels, according to the Energy Information Administration.
“Oil prices are profiting from another sharp decline in U.S. crude oil stocks, which underpins the theory that the oversupply on the oil market is diminishing quickly,” said analysts at Commerzbank in a note.
Prices stayed in positive territory after OPEC in its monthly report on Thursday lifted its forecasts for global oil demand growth this year by 100 thousand barrels a day, saying it now expects growth of 1.37 million barrels a day in 2017. The cartel also said, however, that production from the group rose further in July, driven by higher production in Libya, Nigeria and Saudi Arabia.
Libya and Nigeria are exempt from the pact to cut production as both countries have been suffering from internal conflicts that have hit their oil output. However, with production ramping up in those countries, traders fear OPEC’s to balance the oil market will have been wasted.
“The big spanner in the works is the increase in production from Libya and Nigeria, which if that is maintained over the rest of the year, makes it unlikely that stocks will manage to fall all the way to the five-year average,” Tom Pugh, commodities economist at consultancy Capital Economics, said.
Aside from OPEC production, investors are also nervous about escalating tensions between the U.S. and North Korea, which has weighed on a broad range of commodities except safe haven assets like gold.