Oil prices rose on Wednesday after data showed the market was beginning to tighten, with falling supply, higher demand and lower inventories after two years of heavy surplus.
The U.S. government’s Energy Information Administration (EIA) said in a monthly report global oil demand should increase by its fastest rate in six years in 2016, suggesting a surplus of crude is easing more quickly than expected.
That view was reinforced by industry group the American Petroleum Institute (API), which said U.S. crude oil stocks decreased by 1.2 million barrels last week and distillate stockpiles also fell.
Global benchmark Brent crude oil has dropped to around $50 from a high above $115 a barrel in June 2014 and many oil companies are losing money with oil prices so low.
Brent rose $1.07 a barrel, or more than 2 percent, to a high of $52.99 on Wednesday before easing to $52.90. It jumped as much as $3 on Tuesday to close above $50 for the first time in a month. U.S. light crude rose $1.18 to high of $49.71.
“The market has just realized the extent of the U.S. crude oil production decline and is pricing this in,” said Daniel Ang, oil analyst at brokerage Phillip Futures.
Tuesday’s jump in oil prices pushed both crude benchmarks out of narrow trading ranges that had held for more than a month and chart analysts said prices could now rise further.