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Oil prices edged higher in choppy trading on Friday and were on track for solid weekly gains following positive demand signals and a reported decline in stocks.
Brent crude futures, the international benchmark for oil, were 27 cents higher at $48.69 per barrel at 0915 GMT. US West Texas Intermediate (WTI) crude futures were at $46.31 per barrel, 23 cents higher.
Both contracts were more than 5 per cent above the week's lows, boosted by a report from the International Energy Agency (IEA) that demand growth is accelerating and from the US Energy Information Administration (EIA) that oil stocks had fallen.
“The IEA's report surprised observers with some contradictory statements,” analysts at Commerzbank said in a note, calling their assessment that OPEC compliance with output cuts fell to just 78 perc ent “sobering".
“On the other hand, the IEA raised its demand estimate for the second quarter, while at the same time reducing its figure for non-OPEC supply. Consequently, the oil market showed a sizeable deficit last quarter.”
Commerzbank said the subsequent reduction in the developed world's oil stocks was likely to continue “so long OPEC does not significantly increase its output any further''.
Asian traders are selling oil products out of tanks, and choosing not to renew storage leases, amid soaring demand, while the EIA reported the largest drop in US crude oil inventories in the week to last week in 10 months.
Still, oil stocks remained comfortably above the five-year average, and prices are more than 16 per cent below their 2017 highs, despite an extension to March 2018 of output cuts of 1.8 million barrels per day (bpd) coordinated by the Organization of the Petroleum Exporting Countries.
OPEC's rebalancing effort has been stymied in part by rising output from members Libya and Nigeria, which were exempt from cuts and are currently producing some 700,000 bpd more than at the time of the initial November OPEC cut agreement, according to US investment bank Jefferies.
US oil production has also risen by more than 10 per cent over the past year to 9.4 million bpd.
“OPEC will have to cut deeper and for longer if it wants to eliminate the inventory overhang and prices to rise,” oil analysts at research and brokerage firm Sanford C. Bernstein said
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