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Oil prices up 1.5% as strong Chinese demand overshadows supply glut

China imported 8.55 million bpd of oil in the H1 of 2017, up 13.8% on the same period in 2016

Reuters  |  New York 

Oil prices up 1.5% as strong Chinese demand overshadows supply glut

rose 1.5 per cent on Thursday after much stronger demand in overshadowed a downbeat report by the Energy Agency (IEA) that showed higher production by key Organisation of the Petroleum Exporting Countries (Opec) exporters.

Brent crude was up 70 cents at $48.44 a barrel by 11:27 am EST [15:27 GMT]. US light crude was 70 cents higher at $46.19.

"The market is trying to stabilise," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

Prices had responded only minimally to data Wednesday showing that US inventories dropped last week by the most in 10 months. 

"The market is having difficulty picking its head up," McGillian said.

have dropped in recent weeks to levels not seen since the end of last year as investors lost faith in a deal between and non-producers to reduce output, while the US shale oil production has risen sharply.

But there is evidence world is picking up, notably in the United States and China, the world's two biggest oil consumers.

imported 8.55 million barrels per day (bpd) of oil in the first half of this year, up 13.8 per cent on the same period in 2016, making it the world's biggest crude importer ahead of the United States.

"We are definitely seeing robust demand growth (in China)," said Neil Beveridge, senior oil analyst at Sanford C Bernstein.

Rising demand is helping to drain a global fuel glut but a rebalancing of the market is taking longer than anticipated.

The said the oil market could stay oversupplied for longer than expected due to rising production and limited output cuts by some members of

"Each month something seems to come along to raise doubts about the pace of the rebalancing process," the report said.

"This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by with its own output agreement."

Oil inventories in industrialised nations remain high despite a modest drop in May. OECD (Organisation for Economic Co-operation and Development) stocks are still 266 million barrels above the five-year average, the said.

said on Wednesday the world would need only 32.2 million bpd of its crude next year, down 60,000 bpd from this year and about 400,000 bpd less than it pumped in June.

has promised to curb production by about 1.2 million bpd between January this year and March 2018, while Russia and other non-producers say they will hold back half as much.