Brent oil rose above 107 dollars a barrel on Wednesday as outlook reports indicated global oil demand will rise more quickly this year due to economic growth in industrialised countries.
Economic growth will absorb more supply even as U.S. shale oil output reaches record highs, the International Energy Agency (IEA) said on Tuesday.
Simultaneously, the International Monetary Fund (IMF) raised its global growth forecast for the first time in nearly two years, saying advanced nations could pick up growth from emerging markets.
Brent crude added 58 cents to 107.30 dollars a barrel. On Tuesday, oil hit a nearly two-week high of 108.00 dollars and ended 38 cents up.
U.S. oil was up 68 cents to 95.65 dollars a barrel to touch its highest in more than two weeks.
“Improvement in global industrial production will translate to higher energy demand,” Michael McCarthy, chief strategist at CMC Markets in Sydney said.
“Technical factors and better demand outlook are likely to keep oil prices supported.”
Oil demand growth has been boosted by a robust economic rebound in the U.S., where the IEA has revised up its 2013 demand estimate by 180,000 bpd to 18.9 million bpd.
The IMF also pointed to the U.S. as one of the bright spots for the global economy.
These forecasts and logistics will keep Brent supported at 105.50-106 dollars a barrel in the short term, and prices may bounce above those levels to about 108 dollars, McCarthy said.
The U.S. benchmark may rise to around 96.50 dollars.
Those levels may be the staging point for further gains in Brent to about 110 and 99.50 dollars in U.S. oil, McCarthy said.
Beyond the improving demand outlook, geopolitical tensions in the Middle East also continue to put a floor on oil prices.
With progress in talks between the West and Iran to end a decade-old nuclear dispute removing some of the risk, investors remain worried about Syria crisis spilling disrupting supplies.
“Supply disruption worries from the Middle East are still out there,” said a trader with a Western trading firm.
“They will continue to support oil prices.”
Investors are awaiting the latest oil inventory data from the U.S.
U.S. commercial crude oil inventories likely rose last week for the first time in eight weeks, by an average of 1.6 million barrels, a preliminary media poll showed.
In the refined products sector, distillate stocks, including heating oil and diesel fuel, were forecast to have dropped 400,000 barrels on average.
Gasoline stocks were seen to have increased by 1.6 million barrels last week.
The API will release its report on Wednesday. EST delayed a day due to the Martin Luther King Jr Day holiday on Monday.
EIA data is delayed to Thursday.
Reuters
