Oil rises as IEA sees higher oil demand, shrinking inventories

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OPEC and a number of other producers including Russian Federation agreed previous year on production cuts to ease a global supply glut, but prices haven't risen much above $50 per barrel as compliance has been a problem.

IEA analysts noted that OPEC crude output fell in August for the first time in five months, after renewed turmoil in Libya disrupted flows and others pumped less.

The International Energy Agency also said production by the OPEC cartel and its allies fell in August and compliance with their pact to cut supply to the markets increased.

Within industrialised countries that are members of the OECD oil "product stocks are now only 35 mb above the five-year average", the IEA said in its monthly report.

Industry group the American Petroleum Institute reported on Tuesday that US crude inventories rose by 6.2 million barrels in the week to September 8 to 468.8 million, almost double analysts' expectations for an increase of 3.2 million barrels. But if inventories drop below the five-year average soon, those output cuts may not be prolonged.

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The IEA's report follows OPEC's monthly report out Tuesday. Compliance levels in August hit 82 per cent compared with 75 per cent. Azerbaijan reduced output by 78,000 barrels, which is 24,000 barrels more than quota of 54,000 barrels.

Global oil demand is set to accelerate faster than anticipated this year, according to the International Energy Agency (IEA), which has revised up its 2017 growth estimates.

"Demand growth continues to be stronger than expected, particularly in Europe and the USA", the IEA said, raising its 2017 global oil demand growth estimate to 1.6 million barrels per day from 1.5 million bpd. This will be the second report since Harvey devastated the key oil-refining region of Houston and the surrounding area.

U.S. West Texas Intermediate (WTI) CLc1 was up 38 cents, or 0.8 percent, at $48.61 a barrel.