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. Last Updated: 07/27/2016

Oil Prices Shake Off Profit-Taking to Stay High

LONDON -- Oil prices stayed near 22-month highs Wednesday with profit takers making only a small dent in recent strong gains.

Benchmark Brent blend crude oil traded at $20.38 a barrel by noon in London, down 11 cents on the day, after peaking at $20.57 during Tuesday, the strongest value since October 1997.

Dealers said the latest weekly data from the United States showing a decline in national inventories of crude and petroleum products had underlined the success of OPEC producers in tackling a glut that early this year dragged Brent below $10 a barrel.

The American Petroleum Institute said U.S. crude stocks in the week to July 6 fell 3 million barrels while gasoline inventories shrank by 3.5 million barrels.

U.S. crude stocks now are 6 percent lower than a year ago, while gasoline inventories are 4 percent smaller.

The latest leg of the oil rally has been spurred by the expectation that output curbs implemented by the Organization of Petroleum Exporting Countries will erase the glut entirely in coming months. The International Energy Agency said in a monthly report Tuesday that OPEC compliance with the supply cuts was at 91 percent in July, compared with 87 percent in June.

An unexpected increase of 54 million barrels in estimates of May oil inventories in the world's wealthiest countries offsets much of the drawdown in stocks during the year's first quarter, the agency said.

If correct, the revision would weaken the argument the agency made last month that the world faces an oil shortage this winter that could be its worst in more than a decade.

The Paris-based research center also said world oil demand was expected to accelerate next year, while only marginal extra supplies would emerge from non-OPEC producers.

It said a recovery in Asian economies would help double global demand growth from 900,000 barrels a day, or bpd, this year to 1.8 million bpd in 2000. It expected only 660,000 bpd of extra non-OPEC supply.

Assuming zero stock change, the call on OPEC crude next year would jump to 28.9 million bpd compared with current output of slightly more than 26 million bpd. That would leave OPEC plenty of room both to erode stockpiles further and lift supply, it added.

On Monday, Venezuelan Energy and Mines Minister Ali Rodriguez said he did not expect any change in OPEC's production policy when the group meets next month. The cartel has agreed to maintain supply curbs for a year until the end of March.