Oil prices edged higher on Tuesday on forecasts of a steep draw in U.S. crude oil stocks that could indicate a global oversupply is starting to shrink.
Analysts polled by Reuters expected weekly U.S. crude oil inventories to show a draw of 2.4 million barrels in the week ending Dec. 16.
The American Petroleum Institute, an industry group, said U.S. crude stockpiles fell by 4.1 million barrels in the previous week.
International Brent crude oil futures rose 64 cents to $55.56 per barrel at 4:56 p.m. ET (2156 GMT).
U.S. West Texas Intermediate (WTI) crude oil futures settled Tuesday’s trade up 11 cents at $52.23 per barrel.
Both contracts rose despite a strong dollar, which hit a 14-year high. Crude prices often decline when the dollar strengthens, as it then becomes more expensive to hold dollar-denominated oil contracts.
“There are expectations that we’ll see supplies start to tighten by the end of the year,” said Phil Flynn, analyst at Price Futures Group in Chicago. “We’ll get more heating oil demand this weekend and could see a drop in production next week and even last week because of the cold temperatures.”
One outlying factor that has flummoxed some analysts has been a series of increases in U.S. inventories at the key oil storage hub in Cushing, Oklahoma. Flynn said this rise has been largely offset by a drop in Gulf Coast inventories.
Crude stocks fell more than expected last week, feeding expectations for another large drop in this week’s figures.
Traders said they were starting to square their books ahead of the upcoming Christmas weekend and the week running up to New Year. As a result, and barring major price-moving news, they said markets would likely remain tepid this week.
A deal to cut global supply among OPEC and non-OPEC producers struck this month has boosted oil prices to 17-month highs. The gains have set up 2016 to be the first year since 2012 in which Brent has risen.
“We are in a wait-and-see mood after OPEC-newsflow caused much volatility,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. “The new balance seems to be between $53 and $57 a barrel on Brent for the next weeks.”
Russian energy minister Alexander Novak told Russian newspaper Vedomosti that Russia may extend a production cut beyond the first half of the year if needed.
Reports late on Monday that Saudi Arabian crude oil exports fell by 176,000 barrels per day (bpd) in October had initially supported markets, but the effect later fizzled out due to an increase in Saudi exports of refined fuel products.
Barclays bank said that it expected a Saudi crude export cut to largely affect light crude oil grades, which mostly go to the United States.
“We think it is likely that the Saudis will curtail production/exports of their Arab Light crude and other lighter crudes this spring, easing the typical pre-summer ramp up in shipments to the U.S.,” the British bank said.
Saudi Arabia’s rising refined product output is part of a wider trend that affects mostly Asia.
Asia is seen posting its biggest net refining capacity additions in three years in 2017, further boosting demand for crude in the world’s biggest and fastest growing oil consuming region.
The increase amounts to about an additional 1.5 percent of refining capacity on top of Asia’s total installed capacity of nearly 29 million bpd.
Still, traders see no outright supply shortage for Asian refineries, as OPEC is shielding most of its Asian customers from the planned cuts.