By Nicole Jao
NEW YORK (Reuters) - Oil prices rebounded slightly on Wednesday on short-covering a day after they fell near a two-week low on OPEC's reduced demand forecast, but gains were limited as the dollar hit a seven-month high.
Brent crude futures settled up 39 cents, or 0.5%, to $72.28 a barrel. U.S. West Texas Intermediate crude (WTI) futures gained 31 cents, or 0.5%, to $68.43.
On Tuesday, the benchmarks closed at their lowest level in nearly two weeks after the Organization of the Petroleum Exporting Countries lowered its global oil demand growth forecasts for 2024 and 2025, citing weak demand in China, India, and other regions. It was the producer group's fourth straight downward revision for 2024.
"The forecast is no doubt bearish and the market is still digesting it," said Bob Yawger, director of energy futures at Mizuho (NYSE:MFG), adding the market bounced back as some speculative investors tried to recoup losses.
Both U.S. and global oil production are set to rise to slightly larger record highs this year than prior forecasts, the U.S. Energy Information Administration said.
U.S. oil output is now expected to average 13.23 million barrels per day (bpd) this year and global production is set to reach 102.6 million bpd.
The International Energy Agency, which has a much lower demand growth forecast than OPEC's, is set to publish its updated estimate on Thursday.
Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman have underscored the importance of continuing a "close coordination" within OPEC+ during a phone call on Wednesday, also providing some support.
On the supply side, markets could still face disruption from Iran or further conflict between Iran and Israel.
"If this war continues, Israel is eventually going to attack Iranian oil assets," said Clay Seigle, an independent political risk strategist. "This could be limited to Iran's refineries, but Israeli planners may be more ambitious and go for production and export facilities," he said.
Trump's expected pick for secretary of state, Senator Marco Rubio, could be bullish for prices as his hawkish view on Iran could see sanctions enforced, potentially removing 1.3 million bpd from global supply, said Panmure Liberum's Ashley Kelty.
Iran's oil minister said Tehran had made plans to sustain oil production and exports and was ready for possible oil curbs by the U.S., the ministry's news website Shana reported.
Limiting oil price gains, the dollar advanced to near a seven-month high against major currencies after data showed U.S. inflation for October increased in line with expectations, suggesting the Federal Reserve will keep cutting rates.
A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies, which can reduce demand.
U.S. crude stocks fell by 777,000 barrels last week, market sources said, citing American Petroleum Institute figures on Wednesday.
That compares with a forecast by analysts polled by Reuters for a 100,000-barrel build. Government data is due on Thursday at 11 a.m. ET. Both reports were delayed a day due to Monday's Veterans Day holiday.