Even as countries such as China, South Korea and Japan gear up for lower temperatures during the year-end winter season when demand for fuels such as diesel typically peak, processing gains from turning crude into the heating oil is at the lowest level in at least eight months.
Finally, prices are also being supported by a recovery in US equity markets, which were underpinned by reports that China was preparing to lower tariffs on automobiles.
Traditionally, oil producers agree to cut supply in an effort normalise prices, but with signs that the global economy is beginning to cool and national economies struggling feeling the pinch, there is pressure on governments to keep oil prices low.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.40 per barrel, up 25 cents or, 0.49 percent.
A combination of factors such as production cuts by OPEC and non-OPEC producers such as Russian Federation and further sanctions-related declines in Iranian exports are likely keep markets tight in the first half of next year, Jefferies analyst Jason Gammel said.
U.S. crude inventories at Cushing, Oklahoma, the delivery point for USA crude futures, fell by almost 822,000 barrels in the week through Dec 11, traders said, citing data from market intelligence firm Genscape.
OPEC on Wednesday said it replaced a drop in Iranian exports as USA sanctions resumed and lowered the 2019 forecast of demand for its crude, underlining its challenge to prevent a glut building even after last week's decision to trim output.
"That said, OPEC itself raises doubts in its monthly report as to whether the agreed cuts will be sufficient".
Figures released Wednesday by the U.S. Energy Information Administration revealed U.S. commercial crude inventories fell by 1.2 million barrels in the week through December 7, whereby analysts in a recent poll had expected a decrease of three million barrels. Total volume traded December 12 was 14% above the 100-day average. The Wall Street Journal survey had shown expectations for supply increases of 1.8 million barrels in gasoline and 1.3 million barrels in distillate inventories. Gains from Saudi Arabia and the U.A.E. offset steep declines in Iran, which were the result of USA sanctions against the Islamic Republic's oil industry, the IEA said.
All of these factors have helped OECD oil inventories to rise in October for the fourth month in a row, their highest level since January, the IEA said. Now, it expects a deficit to materialise by the second quarter of next year, provided OPEC sticks to its supply deal.
Oil demand growth is slowing, OPEC says.