Brent crude oil prices rose above $59 a barrel on Wednesday amid tension in the Middle East and signs of a dip in U.S. production, but gains were capped by a report from the International Energy Agency (IEA) indicating that supplies would take longer to tighten than previously expected.
Front-month Brent crude futures LCOc1 were up 68 cents at $59.11 per barrel by 0903 GMT, while U.S. crude futures CLc1 were up 70 cents to $53.99.
Prices were supported by uncertainty in the Middle East, where fighting continues in Yemen. A Saudi-led campaign of air strikes against Iran-allied Houthi rebels threatened to turn into a ground intervention after Egypt said it had discussed military manoeuvres with Saudi Arabia and other Gulf allies.
In the United States, North Dakota's February oil production fell 15,000 barrels per day (bpd) versus January, although the number of producing wells hit a record high.
That followed an Energy Information Administration report forecasting U.S. shale production would fall by 45,000 bpd to 4.98 million bpd in May, which would be the first monthly decline in four years.
But world oil markets may take longer to tighten than expected due to supply rising faster than demand, the IEA said on Wednesday. Production from the Organization of the Petroleum Exporting Countries (OPEC) surged to 31.02 million barrels per day (bpd) in March, almost a two-year high, outweighing a rise in demand.
"Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on," the IEA said in its monthly report.
Meanwhile, China saw its economic growth slow to 1.3 percent between January and March on a quarterly basis after seasonal adjustments, compared with growth of 1.5 percent in the previous three months.
March factory output rose 5.6 percent from a year earlier, below the 6.9 percent seen in a Reuters poll and its lowest level since the global financial crisis in 2008.
Analysts said that investors were losing interest in commodities.
"Given the poor return performance of commodities so far this year, it looks likely that the first two months of the year are likely to prove a peak in inflows for the year," Barclays said in a note on Wednesday, adding that it expected net outflows to resume soon, especially in the oil sector.
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