Oil prices rose on Thursday, with the U.S. futures contracting hitting its highest level in 19 months after government data showed a smaller than expected rise in weekly crude inventories.
The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session high of $54.94 a barrel on Thursday. That would have marked the highest settlement on the New York Mercantile Exchange since July 2015. Prices consolidated at $54.36 a barrel, having gained 77 cents, or 1.4%.
Brent crude, the international futures benchmark, reached a session high of $57.26 a barrel, which would have also been the highest settlement in 19 months. Prices rose 67 cents, or 1.2%, to $56.51 a barrel.
The U.S. Energy Information Administration (EIA) reported Thursday that crude inventories rose by 564,000 barrels to a total of 518.7 million barrels in the week ended February 17. That was only a fraction of the 3.5 million-barrel increase forecast by analysts.
Separate data from the American Petroleum Institute (API) on Wednesday showed stockpiles fell by 884,000 barrels in the latest week.
Gasoline inventories fell by 2.6 million barrels, and distillate fuel stocks decreased by 4.9 million barrels, EIA data showed.
Crude prices have been well supported above $50 a barrel since late November, when the Organization of the Petroleum Exporting Countries (OPEC) agreed to reduce output by 1.2 million barrels per day beginning in January. A few weeks later, nearly a dozen non-OPEC producers led by Russia pledged to lower supplies by 558,000 barrels per day. The coordinated effort to rebalance the market came after a devastating two-year price collapse brought on by record production and weaker demand growth.
Members of the 13-member OPEC cartel have achieved an initial compliance rate of 90% with their agreed production cuts, the Paris-based International Energy Agency (EIA) reported earlier this month. Saudi Arabia has led in the rebalancing of the market after plunging prices contributed to the kingdom’s worst budget deficit on record.
The IEA also boosted its outlook on crude demand for the remainder of the year, a positive sign for a market that is slowly regaining momentum.
However, investors preparing for an even bigger rally in crude prices could be disappointed now that the U.S. shale industry is back in expansion mode. Encouraged by stabilizing prices, American producers are ramping up production and exploration plans. Analysts say the return of U.S shale oil to the market could offset OPEC’s efforts to rein in supplies. This means priced have nowhere to go but back down.
The number of active oil rigs operating on U.S. soil has increased at an accelerated pace since last spring. The total number of active oil and gas rigs currently stands at 751, according to data from oilfield services provider Baker Hughes. That’s an increase of 237 from a year ago. The rig count has surged since the November 30 OPEC output agreement, and appears poised to continue higher in the near future.
 Gillian Rich (February 10, 2017). “IEA Finds 90% Compliance On OPEC Output Deal, Sees Higher Oil Demand.” Investor’s Business Daily.
 Julianne Geiger (February 17, 2017). “U.S. Rig Count Rises As Crude Inventory Levels Hit Record High.” Oilprice.com.
To read the rest of this original content and to learn about our many other top picks, please enter your email below to receive our periodic investor newsletter.