Oil prices rose, Thursday, extending this week’s near 8 percent rally, although an unexpectedly large rise in U.S. inventory levels may temper some of the optimism among investors that global demand and supply could soon be in balance.
U.S. crude stocks rose by 3.1 million barrels to 461 million last week as refineries cut output and idled capacity. Analysts had expected a rise of 2.2 million barrels.
Brent crude oil futures rose 50 cents to $51.83 a barrel by midday, Thursday, but down from an intraday high of $52.03 and down from Wednesday’s one-month high at $53.15. U.S. crude futures rose 42 cents to $48.23 a barrel.
The oil price is set for gains of almost 8 percent this week, its largest weekly increase since late August, after oil industry executives warned that this year’s fall below $50 would force higher-cost producers to reduce output.
“There was a hiccup with the U.S. data this week, but production is still expected to continue to slow,” Saxo Bank commodities strategist Ole Hansen said.
“The rebalancing process has started, but the question is obviously the pace of it and I think that’s where the problem of the market is – it may be getting a little too excited … on that basis, we are at the higher end of its current range.”
Underpinning the crude complex was a drop in the dollar ahead of the release of the minutes of the Federal Reserve’s most recent policy meeting, which may offer some insight into the outlook for interest rates.
A weaker dollar tends to make it cheaper for non-U.S. investors to buy dollar-denominated assets.
With little data out this week, apart from industry and government inventory numbers in the United States, and China on holiday for the first three days, the market has focused on longer-term demand trends that have supported prices.