Oil futures climbed on Wednesday to their highest in more than a week despite a surprise build in crude inventories, as buyers were encouraged by a small weekly decrease in US production.
The US Energy Information Administration (EIA) said crude stocks rose by 118,000 barrels during the week ended June 23, while weekly production declined by 100,000 barrels per day (bpd).
“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. Lipow said production was most likely pressured by a storm in the Gulf of Mexico last week.
Also, the production decline came after US output reached almost 9.4 million bpd during the prior week, the most since August 2015.
Brent futures were up 55 cents, or 1.2 percent at $47.20 a barrel by 11:28 a.m. EDT (1528 GMT). US West Texas Intermediate (WTI) crude was up 44 cents, or 1 percent, at $44.68 per barrel.
That was the highest since June 19 for both contracts, which are on track for a fifth straight day of gains for the first time since mid May. Both contracts were up about 5 percent since June 21 when Brent fell to a seven-month low of $44.35 and US fell to a 10-month low of $42.05.
Oil rose after the EIA’s weekly inventory report, even though data showed a build instead of the 2.6 million barrel draw that analysts had forecast in a Reuters poll.
Some analysts believe the sell-off was overdone.
Ian Taylor, head of the world’s largest independent oil trader Vitol, said Brent will stay in a range of $40-$55 a barrel for the next few quarters as higher US production slows a rebalancing of the market.
Analysts at JBC Energy in a report saw room for prices to recover.
“While the physical crude market remains steady at best, it is worth noting there is now significant room for speculative support for prices to develop if a catalyst were to emerge,” JBC said.
Still, global supplies are still ample despite the output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other oil producing countries of 1.8 million barrels per day (bpd) from January 2017.
OPEC and the other producers, trying to reduce a crude glut, agreed in May to extend the supply cut through March 2018. Still, crude prices have been pressured on rising production from the US and from Nigeria and Libya, two OPEC members exempt 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.

Source: Arab News