Oil prices edged higher on Wednesday, supported by ongoing OPEC-led supply cuts and a surprise fall in U.S. crude inventories, although gains were capped by strong U.S. production.
Brent crude futures were at $71.71 a barrel at 0500 GMT, up 9 cents, or 0.1 percent, from their last close and not far off Wednesday’s five-month high of $72.27 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were at $63.81 per barrel, up 5 cents, or 0.1 percent.
U.S. crude inventories fell by 1.4 million barrels in the week to April 12, compared with analyst expectations for an increase of 1.7 million barrels, Department of Energy (DoE) showed on Wednesday.
“The fundamental backdrop for oil prices remains broadly positive amidst tighter global supply for the current term.” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.
Prices have been supported this year by an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to limit their oil output by 1.2 million barrels per day.
Global supply has also been tightened further by U.S. sanctions on OPEC members Venezuela and Iran.
Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.
But rising U.S. oil production and concerns over the U.S.- China trade dispute kept gains in check.
“A persistent rise in U.S. oil output, together with lingering demand-side concerns emerging from the U.S.-China trade dispute, is limiting price gains,” Abhishek Kumar, Head of Analytics at Interfax Energy in London.
U.S. crude oil output from seven major shale formations was expected to rise by about 80,000 bpd in May to a record 8.46 million bpd, the U.S. Energy Information Administration said in its monthly report on Monday. Graphic: U.S. crude inventories, weekly changes since 2017, click tmsnrt.rs/2XlX17b
Surging U.S. production has filled some of the gap in supplies, although not all of the lost production can be immediately replaced by U.S. shale oil due to refinery configurations.
“The unexpected drawdown in U.S. commercial crude oil stocks was balanced by lower-than-expected withdrawals in the country’s gasoline and distillate inventories,” Kumar said.
Gasoline stocks fell by 1.2 million barrels, less than analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop.
Distillate stockpiles, which include diesel and heating oil, fell 362,000 barrels, also not as much as forecasts for a 846,000-barrel drawdown, the EIA data showed.