Oil Prices Rise for Third Straight Day

Oil prices rose for a third straight day as forecasts of higher demand and tensions in the Middle East outweighed rising OPEC output.

U.S. crude futures settled up 38 cents, or 0.75%, at $51.30 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 33 cents, or 0.58%, to $56.94 on ICE Futures Europe.

Oil prices have been grinding higher in recent weeks amid signs of strong demand and depleting stockpiles. The U.S. Energy Information Administration on Wednesday raised its forecast for 2017 oil prices by $1 a barrel, reflecting recent increases.

"The bulls are in charge for the most part," said Ric Navy, senior vice president for energy futures at RJ O'Brien & Associates LLC. "There's an upward slant, but we're still within a range -- we'll find out where the lines are drawn."

Prices rose amid signs of escalating tensions between Iraq and Iraqi Kurdistan following the Kurdish independence referendum," Mr. Navy said.

Earlier in the day, prices had wavered between gains and losses after the Organization of the Petroleum Exporting Countries reported its collective production shot up by 90,000 barrels a day in September. The increase was driven by higher production in Libya, Nigeria, Iraq and Gabon.

But OPEC also revised upward its forecast for global oil demand growth by about 30,000 barrels a day for both 2017 and 2018.

In recent months, traders have been watching OPEC's output level as producers led by the oil cartel attempt to reduce global oversupply with an output cut.

Russian and Saudi Arabian officials have signaled they are ready to extend a continuing oil production cut deal to the end of 2018, but some analysts are skeptical that other key oil suppliers would agree to an extension.

Earlier in the week, oil futures received a boost from Saudi Arabia's plans to cut crude exports next month.

Saudi Arabia said it would limit crude export allocations for November to 7.15 million barrels a day, according to analysts from JBC Energy. This would put the kingdom's exports more than 1.1 million barrels a day lower than its record overseas sales in November 2016.

"I think the news that the Saudis cut exports in November curtailed declines. Whether that's enough to restart the rally remains to be seen, " said Gene McGillian, research manager at Tradition Energy.

Still, not everybody is convinced by Saudi Arabia's numbers.

"This reduction in supply relates to an unverifiable reference level," said Commerzbank analysts in a recent note. "Saudi Arabian oil exports will actually increase significantly."

Analysts also say other countries such as Russia and Iraq are likely to step in to fill a potential fall in production if Saudi Arabia does reduce its exports.

Other experts attribute oil's recent ascent to creeping political risk in the Middle East.

President Donald Trump is expected to refuse to certify that Iran is in compliance with the 2015 international nuclear agreement, which could trigger additional U.S. sanctions against Tehran.

Iran boosted its oil production after international sanctions against the nation were removed in early 2016 as part of a nuclear deal with six world powers.

"The market was not pricing in enough of a risk premium for Iran due to what President Trump needs to announce before the end of the week in regards to decertification" of the agreement, said Olivier Jakob, managing director at oil consultancy Petromatrix.

Investors will be watching for oil market data from the International Energy Agency on Thursday.

Gasoline futures rose 1.77 cents, or 1.11%, to $1.6092 a gallon. Diesel futures rose 2.12 cents, or 1.2%, to $1.7861 a gallon.

--Christopher Alessi and Biman Mukherji contributed to this article

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com and Biman Mukherji at biman.mukherji@wsj.com