Oil rises after IEA finds market nearing balance

By Karolin Schaps

LONDON (Reuters) - Oil prices edged higher on Thursday after the International Energy Agency (IEA) said the market was nearing balance, while data showing higher U.S. production kept gains in check.

Benchmark Brent crude futures were up 13 cents at $55.99 a barrel at 1525 GMT, on track for their third straight weekly gain after touching a one-month high on Wednesday.

U.S. West Texas Intermediate crude futures were up 22 cents at $53.33 a barrel, also set for a third consecutive weekly gain.

The Paris-based IEA, which advises industrial nations on energy policy, said on Thursday supply and demand in the global oil market was close to matching after a fall in stockpiles in developed countries in March.

"It can be argued confidently that the market is already very close to balance," the agency said in its monthly report.

The market has been oversupplied for three years, prompting members of the Organization of the Petroleum Exporting Countries and some non-OPEC producers to agree to cut output in the first six months of 2017 to rein in the glut.

OPEC data showed members of the group had cut March output beyond the level they had promised.

The IEA said oil stocks in the Organisation for Economic Cooperation and Development (OECD) industrialised countries fell by 17.2 million barrels in March, although inventories were still 300 million barrels above the five-year average.

OPEC meets on May 25 to consider extending the cuts beyond June. Saudi Arabia, Kuwait and most other OPEC members are leaning towards this if agreement is reached with other producers, OPEC sources told Reuters last month.

Thursday's gains were capped by fresh data showing U.S. production continued to climb, potentially undermining the OPEC-led supply reductions.

However, weekly U.S. government data also showed an unexpected drop in U.S. crude stockpiles and a decline in gasoline and distillate inventories, adding to bullish sentiment.

"We see the weekly inventory and U.S. production data being an important oil price driver but it conflicts with the OPEC signals," said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam.

"We will see some sideways trading in the coming weeks."

The IEA trimmed its oil demand growth forecast for 2017 by 40,000 barrels per day and warned that its revised level of 1.3 million barrels per day "could prove optimistic".

(Additional reporting by Naveen Thukral in Singapore; Editing by Dale Hudson and Edmund Blair)