By Christopher Johnson
LONDON (Reuters) - Oil prices rose on Thursday, with benchmark Brent crude trading comfortably above $50 a barrel after a fall in U.S. inventories and a bigger-than-expected cut in Saudi supplies to Asia helped tightened the market.
But a downbeat report from OPEC tempered early gains as the producer group said higher-than-expected production from its competitors would reduce demand for its crude this year.
Brent (LCOc1) was 60 cents higher at $50.82 a barrel by 1255 GMT (8.55 a.m. ET) after hitting an early high of $51.09. U.S. light crude oil (CLc1) was last up 60 cents at $47.93.
"We saw the biggest draw in (U.S.) inventories for the year last week with stockpiles down more than 5 million barrels, and it looks like OPEC's production cut is finally biting," said Greg McKenna, chief market strategist at brokerage AxiTrader.
The Organization of the Petroleum Exporting Countries and other producers including Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year to try to reduce a global fuel glut.
OPEC meets on May 25 to decide on production policy for the second half of 2017, and most analysts expect the group to extend cuts until at least the end of the year.
OPEC has reduced output as promised, but there have been few signs so far that supply has fallen significantly as producers have shielded many key customers, especially in Asia, from cuts.
However, after Brent fell below $50 a barrel last week, analysts said producers felt forced to act.
Saudi Arabia told Asian refiners of its first cuts in crude allocations since OPEC's output reduction took effect in January. Saudi Aramco will reduce supplies to Asian customers by about 7 million barrels in June.
U.S. crude stockpiles posted their biggest weekly drawdown since December last week as imports dropped sharply, while inventories of refined products also fell. [EIA/S]
While U.S. oil inventories fell, the country's oil production
OPEC said in a report on Thursday that higher production in the United States and elsewhere would eat into its market share. It raised its estimate of total oil supply growth from non-OPEC producers this year to 950,000 bpd from a previous forecast of 580,000 bpd.