By Timothy Puko

Oil prices were ticking higher Thursday after the International Energy Agency's monthly report suggested global oversupply is easing.

The Paris-based IEA said that OPEC production was falling and that inventories in big consumer countries have been draining. Bulls highlighted this information in pushing for higher prices, but the IEA warned that gains could be offset by the likely expansion outside of the Organization of the Petroleum Exporting Countries, especially from U.S. shale oil production.

Light, sweet crude for February delivery recently gained 67 cents, or 1.3%, to $51.75 a barrel on the New York Mercantile Exchange. February options expire at Thursday's settlement and futures expire at Friday's settlement. The March contract, which has become the most actively traded, was up 63 cents, or 1.2%, to $52.52 a barrel. Brent, the global benchmark, gained 63 cents, or 1.2%, to $54.55 a barrel on ICE Futures Europe.

The IEA said crude production from OPEC fell 320,000 barrels a day from record rates, to 33.09 million barrels a day in December, after lower Saudi output and disruptions in Nigeria curbed supply. The cartel itself said its output fell by 221,000 barrels a day last month. Output from OPEC was likely to fall more steeply in January than the 320,000 barrels a day cut in December, IEA added.

"Early indications suggest a deeper OPEC reduction may be under way for January, as Saudi Arabia and its neighbors enforce supply cuts," the IEA said.

OPEC and several non-OPEC countries agreed to reduce oil output by around 1.8 million barrels per day starting this month.

Oil prices have risen by around 12% since the deal was announced, on expectations it will help ease a glut that has halved prices from above $100 a barrel and left the amount of oil sitting in storage around record highs.

But oil storage levels in the industrialized nations of the Organization for Economic Cooperation and Development fell in November. Both crude and oil products declined, a fourth consecutive monthly decrease. Taking into account preliminary data for December, OECD stocks are 82 million barrels below July's historical peak, even if for now they remain above the symbolic 3 billion level.

"Got your attention yet? The market is undersupplied BEFORE the OPEC cuts take effect," analysts at Tudor, Pickering, Holt & Co. said about the report in their morning note to clients Thursday. "Bullish, really bullish."

The report did, however, show U.S. oil production was expected to increase by 320,000 barrels a day to average 12.8 million barrels a day, similar to the increase forecast by the U.S. Energy Information Administration earlier this month.

Long-planned projects coming on stream in Brazil and Canada will also bring a combined increase of 415,000 barrels a day, IEA said. That is likely to keep non-OPEC production growing by 380,000 barrels a day despite cuts pledged by Russia and other exporters working in collaboration with OPEC.

"We continue to think that some residual surplus is likely, although the overall pattern with the emergence of a second half deficit is a reasonable assumption in our view," Tim Evans, a Citi Futures analyst said in a note.

Traders are also waiting U.S. oil storage and production data for the week ended Jan. 13, set for release later Thursday by the EIA.

Analysts and traders surveyed by The Wall Street Journal expect crude oil stockpiles to increase by 100,000 barrels on average for that week.

Data from the American Petroleum Institute, an industry group, predicts a decline of 5 million barrels in crude supplies, a 9.8-million-barrel rise in gasoline stocks and a 1.2-million-barrel increase in distillate inventories.

Gasoline futures recently gained 0.2% to $1.5521 a gallon and diesel futures gained 1.2% to $1.6288 a gallon.

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Benoit Faucon,

Sarah McFarlane

and Jenny W. Hsu contributed to this article.

Write to Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

January 19, 2017 11:29 ET (16:29 GMT)

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