Oil rose above $48 a barrel on Wednesday in response to a fall in U.S. fuel inventories and a cut in the U.S. government`s forecast for crude output, despite suggestions from OPEC that the oil market will see a surplus next year.
U.S. crude inventories fell by 8.1 million barrels last week, the American Petroleum Institute (API) said on Tuesday.
Official inventory data from the U.S. government`s Energy Information Administration (EIA) is due at 1430 GMT.
Brent crude, the global benchmark, was up 73 cents at $48.25 a barrel by 1247 GMT. U.S. crude gained 81 cents to $45.85.
"While further upside could be expected in the short term amid the speculations of a cut in U.S production, gains may be limited by the firm oversupply dynamics of the markets," FXTM analyst Lukman Otunuga said.
The drop in U.S. crude stocks will raise hopes that a long-awaited market rebalancing is under way. A supply glut has stuck around for three years, despite an OPEC-led output cut in 2017, keeping oil at less than half its price of mid-2014.
Also supporting prices, the EIA said on Tuesday it expected U.S. crude oil production to rise by less than previously forecast next year due to a lower price outlook.
The lower 2018 forecast of 9.9 million barrels per day will ease concerns that the OPEC-led supply cut will lead to a flood of competing U.S. shale supplies, swamping the OPEC effort.
Still, output of 9.9 million bpd would be a record for U.S. production.
The production cut led by the Organization of the Petroleum Exporting Countries has lent prices some support, but in recent weeks rising output from Libya and Nigeria - OPEC members exempt from the deal - has pushed supply higher.
In its monthly report, OPEC said its oil output rose by 393,000 bpd in June to 32.611 million bpd led by a rebound in Nigeria and Libya, plus extra barrels from Saudi Arabia and Iraq.
"We remain very optimistic ... (about) helping the market to rebalance itself," OPEC Secretary-General Mohammad Barkindo said at an industry conference in Istanbul.
A Saudi industry source said on Wednesday that Riyadh planned to reduce shipments in August by more than 600,000 bpd, taking exports for that month to their lowest this year.
OPEC forecast the world will need 32.20 million bpd of crude from its members next year, down 60,000 bpd from this year.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)