Oil rises as IEA forecast overshadows U.S. crude build

Traders said widening of positions by participants on the back of strong demand in spot market against restricted supplies from growing regions, mainly kept crude palm oil prices higher at futures trade.

Oil prices edged lower on Thursday, but held on the most of their gains from the previous session which came after data showing a record drop in gasoline inventories and indications that the oversupplied global market is starting to rebalance.

"We don't expect a spike up in prices nor do we expect a big drop in prices".

Members of the Organization of Petroleum Exporting Countries and other producers including Russian Federation have pledged to reduce crude output by about 1.8 million barrels a day through March to trim global oil inventories and buttress prices. United States light crude was unchanged at $49.30 after gaining 2.2 per cent in the previous session.

But in August, for the first time in four months, OPEC finally managed to follow through on its promises when its production fell from the previous month's totals.

U.S. gasoline stocks slumped 8.4 million barrels, the largest one-week decline since the EIA started recording the data in 1990, while distillate stocks fell 3.2 million barrels.

Within industrialised countries that are members of the OECD oil "product stocks are now only 35 mb above the five-year average", the IEA said in its monthly report.

"While these bullish forecasts will buoy expectations for a sustained price recovery, we should caution that global oil stockpiles are expected build in the early part of next year", said Stephen Brennock, oil analyst at PVM oil, in a note.

Though inventories in developed economies are still 195 million barrels above the five-year average, it declined by 18.7 million barrels per day in July and will soon fall to this level given robust demand outlook and falling supplies.

Global benchmark Brent crude prices were down 0.11 per cent at $55.10 per barrel, while West Texas Intermediate (WTI) crude was 0.08 per cent up at $49.34 per barrel.

The numbers show that "Hurricane Harvey's disruptive influence continues", said Smith, director of commodity research at ClipperData.

USA gasoline futures dipped after the data, and were down 0.4 percent at $1.6511 a gallon. The IEA said it is time to reexamine the region's energy security with the USA adding refined products to the country's strategic petroleum reserves alongside crude.

The IEA report confirmed the same trend highlighted in OPEC's August report out the day before.