[LONDON] US oil prices hit a six-month high on Thursday, supported by data from the International Energy Agency (IEA) showing tightening supply, in addition to a surprise drop in US crude inventories.
West Texas Intermediate (WTI) US crude futures were 58 cents higher at US$46.81 at 1213 GMT, having earlier peaked at US$46.92, their highest since Nov 4.
Brent crude futures were trading at US$48.00 per barrel, up 40 cents from their last settlement and near a six-month high of US$48.50 hit at the end of April.
"The catalyst for the rally today seems to have been the IEA report where they have said production is going to fall faster and demand is going to rise more strongly than we previously thought," Tom Pugh, commodities economist at Capital Economics said.
The IEA on Thursday raised its 2016 global oil demand growth forecast to 1.2 million barrels per day (bpd) from its April forecast of 1.16 million.
It also noted that output from Nigeria, Libya and Venezuela is down 450,000 bpd from a year ago.
Analysts said that while the IEA data was helping to support prices, the gradual return of Canadian oil sands output and the expectation that prices are nearing levels that could trigger the return of some US production might cap gains.
"The only thing that could throw a spanner in the works to prevent oil from rallying further would be the (US) production," said Ole Hansen, head of commodities research at Saxo Bank.
Traders said an expected increase in Canadian oil sands output following disruptions to over 1 million barrels of daily production capacity due to a wildfire was weighing on markets.
The US Energy Information Administration (EIA) said on Wednesday that US crude inventories fell by 3.4 million barrels to 540 million barrels last week, surprising analysts who had expected an increase of 714,000 barrels.
"With (refinery) runs recovering and production dropping, US (crude) stocks should begin drawing steadily from now," consultancy Energy Aspects said on Thursday.
"We estimate that North American inventories can fall by as much as 12 million barrels across May and June," it said.
Kuwait's acting oil minister said that recent price rises were fundamentally justified.
"Based on the decrease in production that has been shown in the last three weeks, I assume fundamentally the price represents the fall of production," Kuwait's Anas al-Saleh told Reuters on Thursday.
He also said that the Organization of the Petroleum Exporting Countries (Opec), of which Kuwait is a member, would not seek price supporting market intervention during its next scheduled meeting on June 2, and instead it would focus on dialogue between its members.
At an April meeting, rivals Saudi Arabia and Iran could not agree on deal terms, triggering criticism that the producers'cartel had lost its ability to act.