Oil prices on Wednesday climbed for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts could create a crude deficit in the first half of 2017.
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Traders noted oil prices extended earlier gains as the dollar fell to its lowest level in two weeks against a basket of currencies after the Federal Reserve increased interest rates as expected but did not signal a faster pace of monetary tightening this year.
A decline in the dollar makes greenback-denominated oil less expensive for holders of other currencies.
Brent futures gained 89 cents, or 1.8 percent to settle at $51.81 a barrel, their first increase in seven days. The global benchmark on Tuesday settled at its lowest level since Nov. 30.
U.S. West Texas Intermediate (WTI) crude gained $1.14, or 2.4 percent, to settle at $48.86 per barrel, its first increase in eight days. U.S. crude slid on Tuesday to its lowest since Nov. 29, erasing all of its gains made since the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut crude output.
Those increases pushed both Brent and WTI out of technically oversold territory for the first time in six days.
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Data from the U.S. Energy Information Administration (EIA) showed U.S. crude stocks fell last week, the first weekly decline after nine straight increases.
Crude inventories fell 237,000 barrels in the week to March 10. Analysts had forecast an increase of 3.7 million barrels.
"Inventories are still a concern, but the EIA report signaled that stockpiles are not quite as big a concern as previously thought," said Stewart Glickman, head of energy research at CFRA Research in New York.
The IEA said global inventories rose in January for the first time in six months despite OPEC output cuts, but oil prices still drew support from the monthly report which said if the cartel sticks to production curbs the market should see a deficit of 500,000 barrels per day (bpd) in the first half.
"For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve," the IEA said.
OPEC agreed on Nov. 30 it would cut 1.2 million bpd during the first half of 2017, and on Dec. 10 that non-OPEC producers would cut about 600,000 bpd from their output.
Despite OPEC compliance with its share of the cuts, stockpiles have kept rising, partly because OPEC members pumped heavily before cuts kicked in and also because U.S. shale producers have raised output.
Last week, futures prices plummeted more than 8 percent, their biggest declines since early November, as U.S. crude inventories surged to a record high.