By Christopher Alessi and Benjamin Parkin
Oil prices bounced on Wednesday as strong U.S. demand ate into crude and fuel inventories.
West Texas Intermediate futures rose 0.3% to $66.58 a barrel at the New York Mercantile Exchange, on track for the highest close since late May. Brent crude, the global oil benchmark, rose 0.6% to $76.34 a barrel. Prices had traded lower overnight.
The Energy Information Administration said on Wednesday morning that crude oil inventories fell by 4.1 million barrels to 432.4 million barrels, a larger reduction than expected. Analysts and traders surveyed by The Wall Street Journal had forecast a drop of 1.6 million. Gasoline and distillate stocks also fell, surprising traders looking for increases.
"Everywhere you look, demand is strong. Gasoline demand is strong, refinery demand is strong," said Phil Flynn, a senior analyst at the Price Futures Group. "That's supporting prices."
The crude oil market fell from three-year highs made in May as traders bet global supplies would increase. The Organization of the Petroleum Exporting Countries and other major producers like Russia are set to convene next week. Saudi Arabia -- the de facto head of the cartel -- and Russia have recently indicated a willingness to increase production in response to steadily rising prices and geopolitical risks to supply in Venezuela and Iran.
Saudi Arabia's oil minister is flying to Russia this week to discuss ways to manage the output boost they say they want to propose at the OPEC summit, officials at the group said.
But other data released Wednesday forecast solid demand. The International Energy Agency said it expected the world's appetite for oil to remain robust throughout 2019. In its monthly report, the agency predicted global oil demand would grow by 1.4 million barrels a day in 2019, on par with this year.
However, the IEA also said it expects non-OPEC oil production to continue to surge, largely driven by the U.S. Non-OPEC supply growth should slow only slightly in 2019, to 1.7 million barrels a day, compared with 2 million barrels a day this year.
Oil traders largely appeared to shrug off a tweet from President Donald Trump saying that "Oil prices are too high, OPEC is at it again. Not good!". In April, a similar tweet from Mr. Trump sent the price of oil lower momentarily.
The market's main focus is on the OPEC meeting and the possibility that the cartel and its allies will ramp up production after more than a year of holding back output, said Ole Hansen, head of commodity strategy at Saxo Bank. The deal to reduce production is currently set to expire at the end of this year.
"There is no way around an increase in production by Russia and Saudi Arabia," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "It does not make sense to risk an overly tight market...just when global economic growth is cooling down."
Among refined products, gasoline futures rose 1.4% to $2.1187 a gallon while diesel contracts gained 0.5% to $2.1732 a gallon.
--Summer Said and Benoit Faucon contributed to this article.
Write to Christopher Alessi at email@example.com and Benjamin Parkin at Benjamin.Parkin@wsj.com
(END) Dow Jones Newswires
June 13, 2018 12:15 ET (16:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.