LONDON (Reuters) - Brent oil prices rose by $1 on Tuesday to a one-week high on forecasts of a steep draw in U.S. crude stocks that could indicate global oversupply is starting to shrink.
Benchmark Brent crude futures were trading up 95 cents, or 1.7 percent, at $55.87 a barrel at 1453 GMT. They hit an intraday high of $55.92.
U.S. crude futures were up 52 cents at $52.64 a barrel. Both contracts defied a strong dollar, which hit a 14-year high.
Crude prices often decline when the dollar strengthens as it then becomes more expensive to hold dollar-denominated oil contracts.
Oil prices were buoyed by indications of a strong reduction in U.S. oil inventories. Analysts polled by Reuters expected weekly U.S. crude oil stocks to show a draw of 2.4 million barrels in the week to Dec. 16. [EIA/S]
Stocks fell more than expected in data published last week, lifting expectations for another large drop in this week's figures.
A deal to cut global supply among OPEC and non-OPEC producers struck this month has boosted oil prices to 17-month highs. The gains have set up 2016 to be the first year since 2012 in which Brent has risen.
Russian Energy Minister Alexander Novak told Russian newspaper Vedomosti that Russia may extend a production cut beyond the first half of 2017 if needed.
"We are in a wait-and-see mood after OPEC newsflow caused much volatility," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. "The new balance seems to be between $53 and $57 a barrel on Brent for the next weeks."
Asia is seen posting its biggest net additions to refining capacity in three years in 2017, further boosting demand for crude in the world's largest and fastest-growing oil-consuming region.
The increase amounts to roughly an additional 1.5 percent of refining capacity on top of Asia's total installed capacity of nearly 29 million barrels per day.
Still, traders see no outright supply shortage for Asian refineries, as the Organization of the Petroleum Exporting Countries is shielding most of its Asian customers from the planned cuts.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Susan Thomas)