NEW YORK - Oil futures climbed more than 1 per cent on Wednesday to their highest in more than a week as buyers were encouraged by a small weekly decrease in U.S. production and shrugged off a surprise build in crude inventories in the world's top oil consumer.
The U.S. Energy Information Administration (EIA) said crude stocks rose 118,000 barrels last week, while weekly production declined 100,000 barrels per day (bpd) to 9.3 million bpd. That was the biggest decline in weekly output since July 2016.
"The most interesting thing is crude oil production was down ... which is a significant decline given the increases in previous weeks," Andrew Lipow, president of Lipow Oil Associates in Houston, said.
Other analysts and traders noted the U.S. production decline last week was related to temporary factors like Tropical Storm Cindy in the Gulf of Mexico and maintenance work in Alaska that will likely be reversed in coming weeks.
U.S. output during the week ended June 16 reached almost 9.4 million bpd, the most since August 2015.
Futures rose after the EIA's report, even though data showed a build instead of the 2.6 million-barrel draw that analysts had forecast in a Reuters poll.
Brent futures gained 66 cents, or 1.4 per cent, to settle at US$47.31 a barrel, while U.S. West Texas Intermediate crude rose 50 cents, or 1.1 per cent, to settle at US$44.74 per barrel.
That was the highest close since June 16 for the contracts, the first time since mid May that they rose for five days straight. Both were up over 5 per cent since June 21 when Brent fell to a seven-month low of US$44.35 and WTI fell to a 10-month low of US$42.05.
Ian Taylor, head of the world's largest independent oil trader Vitol, said Brent will stay in a range of US$40-$55 a barrel for the next few quarters as higher U.S. production slows a rebalancing of the market.
Analysts at JBC Energy in a report saw room for prices to recover, saying "there is now significant room for speculative support for prices to develop if a catalyst were to emerge."
Still, global supplies are ample despite output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other producing countries of 1.8 million bpd since January.
OPEC and the other producers, trying to reduce a crude glut, agreed in May to extend the supply cut through March 2018. But OPEC has exempted Nigeria and Libya from cutting output.
OPEC delegates have said they will not rush to cut crude output further or end the exemptions, although a meeting in Russia next month is likely to consider further steps to support the market.