Oil prices rose to a four-month high on Wednesday, boosted by optimism that production cuts have brought down global inventories as demand remains steady.
Light, sweet crude for October delivery settled up 93 cents, or 1.9%, to $50.41 a barrel on the New York Mercantile Exchange, the highest close since May 24. The October contract expired on Wednesday, and the more actively traded November contract rose 79 cents, or 1.6%, to $50.69. Brent, the global benchmark, gained $1.15, or 2.1%, to $56.29.
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Investors have become more optimistic about the oil market's prospects recently amid signs of tighter balance between supply and demand in the global market.
"Everything is basically falling into place for the last quarter of the year," said Peter Cardillo, chief market economist at First Standard Financial. "Today's close signals that $55 oil is not that far away."
U.S. refiners continued to ramp up operations as the amount of oil products sitting in storage declined, the U.S. Energy Information Administration reported Wednesday. Refinery utilization increased to 83.2% in the week ended Sept. 15, while gasoline and distillate stockpiles fell.
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.
"I think the market to a large extent is still suspect of the data," said Kyle Cooper, a consultant at Ion Energy Group.
The Organization of the Petroleum Exporting Countries and major producers outside the cartel, including Russia, agreed late last year to cut production by 1.8 million barrels a day from peak October 2016 levels, in 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 of the OPEC members are beginning to breathe a sigh of relief," said Andy Lipow, president of Lipow Oil Associates.
OPEC and non-OPEC participants in the output cut deal are set to meet in Vienna Friday to review compliance with the agreement. 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.
Gasoline futures closed near flat at $1.6551 a gallon and diesel futures rose 1.9% to $1.8070 a gallon, the highest settle value in more than two years.
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(END) Dow Jones Newswires
September 20, 2017 16:01 ET (20:01 GMT)