Oil prices rose Wednesday amid ongoing optimism that production cuts have shown some success in bringing down global inventories.
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Light, sweet crude for October delivery gained 89 cents, or 1.8%, to $50.37 a barrel on the New York Mercantile Exchange. The October contract expires Wednesday after the market closes. The more actively traded November contract was up 88 cents, or 1.8%, at $50.78. Brent, the global benchmark, advanced $1.06, or 1.9%, to $56.20.
On Wednesday, the U.S. Energy Information Administration reported that refiners continued to bring back operations, increasing utilization rates to 83.2% in the week ended Sept. 15. As refineries restart, that should increase demand for crude as they get back to processing fuels, analysts said.
"Refiners are returning from the aftermath of Hurricane Harvey," said Andy Lipow, president of Lipow Oil Associates, a trend he expects to continue over the next few weeks.
The hurricane knocked out a significant portion of the country's refining capacity when it hit Texas, upending a trend of steadily declining crude stockpiles that helped boost prices over the summer.
Meanwhile, markets shrugged off a larger-than-expected build in crude inventories in the latest report. The amount of crude oil in storage increased by 4.6 million barrels last week, exceeding analyst expectations for a build of 2.6 million barrels.
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"I think the market to a large extent is still suspect of the data," said Kyle Cooper, a consultant at Ion Energy Group.
Investors have also been encouraged by a recent decline in commercial oil inventories in the Organization for Economic Cooperation and Development, a group of industrialized oil-consuming nations, according to Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
"There's a certain degree of optimism in the market," Mr. Tchilinguirian said.
The International Energy Agency in its latest monthly report said commercial OECD oil stocks stayed flat in July, month-on-month, at 30.016 million barrels, about a 190 million barrels above Organization of the Petroleum Exporting Countries' target of the last five-year average. That is 7% above the five-year average, compared with 12% earlier this year, according to HSBC Holdings PLC.
OPEC and 10 producers outside the cartel, including Russia, agreed late last year to cap production at around 1.8 million barrels a day lower than peak October 2016 levels -- part of an effort to alleviate the global oil glut and boost prices. The deal was extended in May through March 2018 but has been hindered by both a lack of compliance by some signatories and steady U.S. shale output.
Some cartel members -- including less compliant nations like Iraq -- have indicated in recent weeks that they would be open to extending the production cuts after the deal expires next year, but analysts and investors don't expect a final decision until OPEC's next official gathering in November.
"OPEC will have no choice but to consider extending the production cuts beyond March 2018," according to analysts at Commerzbank. "Any increase in the production from the spring of 2018 would...generate renewed oversupply in the oil market and put prices under pressure," the analysts wrote in a note Wednesday.
OPEC and non-OPEC participants in the output cut deal are set to meet in Vienna Friday to review compliance with the agreement.
Gasoline futures fell 0.3% to $1.6503 a gallon and diesel futures rose 1.7% to $1.8032 a gallon.
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(END) Dow Jones Newswires
September 20, 2017 12:28 ET (16:28 GMT)