Aug. 10 (UPI) -- Even with higher OPEC production, signs of a narrowing gap between supply and demand, and rising geopolitical tensions, pushed oil prices higher Thursday.
Economists at the Organization of Petroleum Exporting Countries reported total group production increased 173,000 barrels per day to 32.87 million barrels per day in July, its highest level of the year. Strong production figures have been a mounting concern for traders monitoring the OPEC-led effort to balance the market with coordinated production declines.
OPEC's report followed U.S. data that show production declined and the level of crude oil inventories moved lower.
"The large drop in U.S. inventories is showing clearly that OPEC production cuts are starting to work," Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter.
Global oil inventories remain above the five-year average, indicating the market is still lopsided. OPEC in its latest month market report said it expected global oil demand to increase, with the 2018 forecast moving higher by 1.28 million barrels per day. Though OPEC production levels were higher, output from non-member states declined by 28,000 barrels per day and should decline another 42,000 barrels per day next year.
Crude oil prices were moving sharply higher before the opening bell on Wall Street. The price for Brent crude oil was up 1.5 percent at 9:20 a.m. EDT to $53.51 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 1 percent to $50.07, regaining its hold above the psychological level of $50 per barrel.
Part of the increase could be due to escalating tensions between the United States and North Korea. With Pyongyang saying the U.S. territory of Guam was a potential target, U.S. Defense Secretary Jim Mattis warned North Korea that it's grossly outmatched.
"It must be noted that the combined allied militaries now possess the most precise, rehearsed and robust defensive and offensive capabilities on Earth," he said in a statement.
On the economic front, oil prices were unmoved by a report that first-time jobless claims in the United States, the world's largest economy, were 3,000 higher than the previous week. The U.S. Labor Department reported the previous week's claims were revised higher by 1,000, though the less-volatile four-week moving average dropped 1,000 from last week.
Elsewhere, OPEC members continue their effort to reign in member-state production. Saudi Arabia and Iraq, the No. 1 and No. 2 producers in the group, respectively, stressed their agreement to work to a balanced market. Saudi Arabia's gains in production last month, however, nearly offset the decline from Iraq.