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US crude jumps 2.2% to 5-week high, settling at $49.30, as demand outlook improves

Key Points
  • The International Energy Agency raised it outlook for 2017 global oil demand growth.
  • U.S. crude stockpiles rose sharply and gasoline inventories plunged due to impacts from Hurricane Harvey.
  • The report echoed sentiments expressed on Tuesday by OPEC, which also sees oil markets tightening.
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices rose on Wednesday after the International Energy Agency said a global surplus of crude was starting to shrink, even though U.S. data showed another big increase in crude inventories due to the ongoing effects of Hurricane Harvey.

U.S. commercial crude inventories rose by 5.9 million barrels in the week through Sept. 8, compared with analysts' estimates for a rise of 3.2 million barrels.

U.S. gasoline and distillate stocks fell sharply as Harvey shut nearly a quarter of the nation's capacity with major Gulf Coast refineries only starting to come back to life in the last few days.

Analysts say U.S. stocks data may not give a full picture in coming weeks because of two major hurricanes — Harvey and Irma.

Oil's supply concerns still there post-Irma, but this could be crude's next catalyst

International benchmark Brent crude was up 88 cents, or 1.6 percent, at $55.15 a barrel by 2:06 a.m. ET (1806 GMT). It earlier topped $55 for the first time since April.

U.S. West Texas Intermediate (WTI) was up $1.06, or 2.2 percent, at $49.29 a barrel.

U.S. crude production rebounded to an average of 9.35 million barrels per day from 8.78 million bpd a week earlier, entirely the result of increases in the lower 48 states.

U.S. gasoline stocks slumped 8.4 million barrels, the largest one-week decline since the U.S. Energy Department started recording the data in 1990, while distillate stocks fell 3.2 million barrels.

U.S. gasoline futures dipped after the data, and were down modestly to $1.6503. Andrew Lipow of Lipow Oil Associates in Houston said it was a "counterintuitive" reaction.

"The market is reacting in anticipation of refineries restarting, at the same time expecting a decline in demand due to the after effects of Hurricanes Harvey and Irma," he said.

The International Energy Agency, in its report, noted that the country's reliance on the Gulf Coast makes it vulnerable to similar events like Harvey, saying "normal operations are too important to fail."

OPEC oil production falls for the first time since March

It recommended that the U.S. strengthens its energy security to address events, such as hurricanes, by potentially adding oil products to government-held inventories.

Overall, the IEA said in its monthly report that robust global demand and an output drop from OPEC and other producers should help balance inventories.

The assessment echoed a report by the Organization of the Petroleum Exporting Countries forecasting higher demand for its oil in 2018 and pointing to signs of a tighter global market.

OPEC agreed with non-member nations last year to cut supply by 1.8 million bpd through March 2018, and major nations are seeking to extend that agreement further.

The U.S. EIA on Tuesday revised its 2017 and 2018 U.S. oil output forecasts lower to reflect, in part, the effects of Harvey.

— CNBC's Tom DiChristopher contributed to this story.