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Oil edges up as IEA sees higher oil demand, shrinking inventories

Reuters  |  London 

By Fanny Potkin

(Reuters) - prices ticked higher on Wednesday after the International Energy Agency said the surplus was starting to shrink due to robust demand and an output drop from OPEC and other producers.

U.S. West Texas Intermediate (WTI) was up 11 cents, or 0.2 percent, at $48.34 a barrel at 0944 GMT after dropping earlier in the day.

International benchmark Brent crude was up 13 cents, or 0.2 percent, at $54.40 a barrel.

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly," the IEA, which coordinates energy policies in industrialised nations, said in its monthly report.

"Demand growth continues to be stronger than expected, particularly in Europe and the U.S.," the IEA said, raising its 2017 demand growth estimate to 1.6 million barrels per day from 1.5 million bpd.

The assessment echoed a publication by the Organization of Petroleum Exporting Countries, which on Tuesday forecast higher demand for its in 2018 and pointed to signs of a tighter market.

But Wednesday's price gains were capped by reports of rising U.S. crude inventories.

Industry group the American Petroleum Institute reported late on Tuesday that U.S. crude stockpiles rose nearly twice the expected levels last week. Refineries cut output after Hurricane Harvey, while gasoline and distillate inventories fell.

Analysts say U.S. stocks data may not give a full picture in coming weeks because of two major hurricanes - Harvey and Irma.

Crude inventories rose by 6.2 million barrels in the week to Sept. 8 to 468.8 million, nearly double analysts' expectations for an increase of 3.2 million barrels.

The U.S. Department of Energy's Energy Information Administration (EIA) reports on stockpiles and refinery is published later on Wednesday.

The EIA also said on Tuesday it had revised both its 2017 and 2018 production forecast figures lower to reflect, in part, the effects of Hurricane Harvey.

(Reporting by Fanny Potkin in and Aaron Sheldrick in Tokyo; Editing by Edmund Blair)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, September 13 2017. 14:47 IST