Oil prices advanced Friday as stronger signs of a shrinking global glut and increased demand continue to emerge.
Brent crude, the global oil benchmark, rose 0.51% to $49.55 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.43% at $47.12 a barrel.
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U.S. oil inventories have been falling for several months even with continued output growth, suggesting demand increases are gathering steam. Meanwhile, there have been reports that end-of-May oil storage in Saudi Arabia was at its lowest level since the start of 2012.
"The support comes from the large inventory decline around the world," said Giovanni Staunovo, an energy analyst at UBS.
A more subdued dollar, which makes dollar-denominated commodities more affordable for holders of other currencies, is also lifting crude prices, Staunovo added.
On the demand side, China is set to significantly loosen restrictions on private firms entering the domestic distribution and storage space. That "may spur an upsurge in private storage-capacity growth," said BMI Research, and boost crude imports. China recently ousted the U.S. as world's biggest recipient of international oil, taking in an average 8.5 million barrels a day in the first half of 2017.
Investors are next looking to Friday's weekly U.S. oil-rig data and Monday's meeting of delegates from the Organization of the Petroleum Exporting Countries to review the continuing production-cut deal and discuss adding Nigeria and Libya to the pact. The two countries are currently exempt but have seen output rise sharply this year.
"Any talk of deeper cuts is likely to prove bullish for prices in the short term," said an ING Bank morning note.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.22% to $1.61 a gallon. ICE gas oil changed hands at $495.25 a metric ton, down $0.92 from the previous settlement.
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Oil prices fell Friday morning on renewed concerns about oversupply.
Light, sweet crude for September delivery recently lost 72 cents, or 1.5%, to $46.20 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 67 cents, or 1.4%, to $48.63 a barrel on ICE Futures Europe.
Further confirmation of rising supply from the Organization of the Petroleum Exporting Countries helped sink oil from earlier gains in overnight trading, brokers said. OPEC supply is more than 33 million barrels a day in July, up 145,000 barrels a day from a month ago, tanker tracking firm Petro-Logistics said.
The data isn't far from what has already been reported. The International Energy Agency said last week that OPEC crude output was rising to its highest level in 2017 at 32.6 million barrels a day, driven by Libya, Nigeria and Saudi Arabia.
But any prospect for more OPEC supply increases can shake a market in which a rally was already looking fragile, brokers and analysts said. A recent rally, which includes U.S. oil's longest winning streak in seven years, has stalled late this week as it bumped up against six-week highs, a signal to some momentum-based traders that oil's next move is a retreat.
OPEC has tried to right the market with a pact to cut output this year, but it hasn't pushed futures prices to the $60 mark that many expected. Now traders are becoming leery again of rising production from several sources globally, including countries that were supposed to be part of OPEC's output cuts.
"The silent fear now is that the OPEC deal could really start to unravel, " said Bill Baruch, chief market strategist at Chicago brokerage iiTrader.
OPEC officials are about to start meetings in Russia this weekend with counterparts from non-OPEC countries that have participated in this year's output cuts. Delegates are supposed to discuss the possibility of including two previously exempted OPEC members, Nigeria and Libya, into the deal. But traders are becoming skeptical that meetings will produce any significant changes.
"We're getting back to this idea that the market may not rebalance as thought," said Bart Melek, head of commodity strategy at TD Securities in Toronto. "What's triggering it is the lack of signaling from Saudi Arabia, OPEC and Russia that they may do more."
Gasoline futures recently lost 1.8%, to $1.5771 a gallon, and diesel futures lost 1.2%, to $1.5259 a gallon.
--Sarah McFarlane contributed to this article.
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(END) Dow Jones Newswires
July 21, 2017 11:42 ET (15:42 GMT)