Oil futures pushed to session highs by midday Tuesday in Asia, adding to more than a week straight of gains which have allowed the U.S. benchmark to move back above $50 a barrel for the first time in two months, lifted by growing optimism that the market is tightening.
Analysts say a swatch of positive news the past two weeks, such as ebbing U.S. inventories and slowing production, has polished investor confidence in oil--which has been in the doldrums due to a large persistent glut.
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That as data due Wednesday are expected to show U.S. crude stockpiles fell further last week. A "steady strengthening in demand expectations" have also lifted oil prices recently, said the Federal Reserve Bank of New York in its recent oil report.
"I think this rally will sustain a little while longer because the attitude is changing," said Grace Liu, the head of petrochemical research at Guotai Junan International, pointing to Saudi Arabia's "rebalance-first" approach as the main driver behind recent optimism.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September recently traded up 0.2% at $50.27 a barrel in the Globex electronic session. October Brent crude on London's ICE Futures exchange gained 0.2% to $52.82.
For nearly three years, the kingdom and other members of the Organization of the Petroleum Exporting Countries, together with Russia, have pumped crude at high rates in a bid to drown out smaller US producers. The result: prices plunged to a 13-year low and global inventories surged. It also tipped the global supply-demand balance, causing economic woes for some nations as their usual stream of oil revenue shrank.
To reset, OPEC and a handful of non-US oil players have been cutting output this year. But prices have continued to fall, and many are still skeptical of the long-term effect of imposing a cap on production when American output has been rebounding. In May, total U.S. crude production grew 0.6% from April to hit the highest daily average for a month this year, the Energy Information Administration said Monday.
Still, the same data also reveal growth might be sputtering, bolstering views that high-cost producers in the U.S. might be pulling back amid still-low prices. May's growth was the second slowest of 2017.
But it might still be premature to assume shale production will cool into year-end because capital-spending reductions the past several years have largely been a function of companies "being able to get more for every dollar invested," said Energy Aspects.
Among refined products, Nymex September diesel gained 0.3% to $1.6724 a gallon, reformulated gasoline blendstock rose 0.2% to $1.68 and August ICE gasoil climbed 1.2% to $495 per metric ton.
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(END) Dow Jones Newswires
July 31, 2017 23:19 ET (03:19 GMT)