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Oil takes heart from decline in U.S. stocks

U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration said.

In late November, the Organization of the Petroleum Exporting Countries agreed to cut production by 1.2 million barrels a day, the first such reduction agreement since 2008.

That marked a sharp reversal from the recent trend, which has seen oil prices crash through a number of technical levels to fall as low as $43.76.

Official numbers on weekly US crude and product inventories from the EIA are scheduled to be released 1430 GMT on Wednesday.

"We saw the biggest draw in (US) 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.

Gasoline demand rose to the highest since late March to over 9.2 million barrels a day, but still down 2.4% from the same period past year, according to the data.

Gasoline demand also perked, as US gasoline futures were up 2.4% after the report.

Speaking at the Platts Crude Oil Summit in London on Wednesday, Neil Atkinson, head of oil analysis at the International Energy Agency, said the current agreement by more than 20 major oil producers has succeeded in making a dent in the global supply glut that has kept prices under pressure in recent years.

Oil prices extended their gains after a report showed U.S. crude stockpiles fell by the biggest margin since December and were down for the fifth straight week.

US West Texas Intermediate (WTI) crude futures were at $47.57 a barrel, up 24c, or 0.5% from the last settlement.

Questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying the country's production exceeded 800,000bpd for the first time since 2014 and could rise to 1.2 million bpd later this year.

The report will add to a debate about the effectiveness of the supply cut pact, which is expected to be extended when producers meet later this month. "Lower 48 (all states excluding Alaska and Hawaii) oil production is set to expand by an additional 390,000 bpd from May 2017 to December 2017 assuming a WTI price of $50 per barrel".

Oil was also buoyed by a Reuters report on Wednesday that Saudi Arabia would cut crude supplies to Asia.

"Oil prices above $40 is a profitable level for most USA shale producers to keep pumping".

"It is hard to see how the day's gains last".

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