Oil climbed towards $53 a barrel on Tuesday, reaching a two-month high, supported by signs that a persistent supply glut is starting to ease amid strong demand and OPEC-led production curbs.
U.S. inventory reports due on Tuesday and Wednesday are expected to show crude stocks fell by 2.9 million barrels last week, the fifth straight week of declines. Stocks have already fallen below year-ago levels.
Brent crude, the international benchmark, was up 12 cents at $52.84 a barrel at 0848 GMT. The contract traded intraday at $52.93, the highest since May 25. U.S. crude CLc1 was up 20 cents at $50.37.
“The most bullish argument looking forward is that we are now in the second half of the year,” said Tamas Varga of oil broker PVM. “Global demand is expected to pick up significantly.”
Oil company BP, which reported its earnings on Tuesday, was upbeat on the demand outlook.
After a slow start to the year, global demand recovered in the second quarter and was expected to grow by 1.4 to 1.5 million barrels per day (bpd), BP said – higher than some 2017 forecasts such as that of OPEC.
“Global demand is looking pretty strong, and prices will firm around the levels seen today,” BP Chief Financial Officer Brian Gilvary told Reuters.
The Organization of the Petroleum Exporting Countries, as part of a deal with Russia and other non-members, is reducing output by about 1.2 million bpd from Jan. 1, 2017 until March next year to get rid of excess supply.
OPEC’s adherence to its supply cuts has been high but in recent months output has increased due in part to recovering output in countries exempt from the deal.
Oil output by OPEC rose last month by 90,000 bpd to a 2017 high, a Reuters survey found, led by a further recovery in supply from Libya, one of the exempt producers.
The increase means it will take longer for OPEC to clear the excess, analysts at Commerzbank said, although they added such concerns had faded for now.
“Market sentiment has quite clearly turned, with price falls being viewed as an opportunity to buy,” the bank said.