Oil prices rose on Thursday after an unexpected draw in U.S. gasoline inventories pointed to higher demand in the world’s biggest oil market.
U.S. light crude was up 66 cents, or 1.3 percent, at $53 a barrel. Benchmark Brent crude rose 51 cents a barrel, or 0.9 percent, to $55.63 per barrel by 2:33 p.m. ET (1933 GMT).
“I think the market is frozen,” said Dominick Chirichella, senior partner at the Energy Management Institute.
He said that while the U.S. gasoline stock draw was interesting, it was insufficient to knock the market out of its range-bound trade, limited between production cuts from OPEC and brimming U.S. crude stockpiles.
“If we continue to see a decent compliance level in the 85 to 95 percent range from OPEC and we do see inventories cleaning up in the U.S. we may get another leg up,” Chirichella said.
The U.S. Energy Information Administration (EIA) said on Wednesday gasoline inventories fell by 869,000 barrels last week to 256.2 million barrels, versus analyst expectations for a 1.1 million-barrel gain.
The fall in gasoline stocks suggested U.S. consumption was stronger than expected, and may be healthy enough to support prices at time when most fuel oil markets are very well stocked.
“U.S. gasoline draws are supporting prices today,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates. “They are an indication of stronger U.S. demand.”
U.S. gasoline prices were up about 1 percent on Tuesday.
But bloated crude supplies meant that fuel markets remain under pressure.
The EIA report also said that U.S. commercial crude inventories rose by 13.8 million barrels to 508.6 million barrels.
U.S. bank Goldman Sachs said high fuel inventories and rising U.S. crude production meant oil markets would be over-supplied for some time, but that they would drain gradually.
“We do not view the recent excess U.S. builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness,” the bank said in a note to clients.
“The draws that we expect will start from a high base,” the bank said. “U.S. production has also rebounded … and we view the faster shale rebound as creating downside risk to our 2018 WTI price forecast of $55 per barrel, but not to our expectation that the global oil market will shift into deficit in 1H17.”
High oil inventories have been undermining efforts by the Organization of the Petroleum Exporting Countries and other producers including Russia to tighten the market by cutting production.
OPEC and other big exporters have agreed to trim output by almost 1.8 million bpd during the first half of this year in order to prop up prices and rebalance the market.