An oil well is seen near Denver, Colorado. Picture: Reuters
An oil well is seen near Denver, Colorado. Picture: Reuters

New York — Oil prices edged higher on Wednesday, turning positive after US government data showed a bigger weekly draw than expected in domestic crude inventories along with unexpected declines in petrol and distillate stocks.

Earlier in the session, Brent and US crude had retreated on concerns about rising production in the US and expectations that oil cartel Opec and other producers could relax voluntary output cuts.

Brent crude was up 53 US cents at $76.41 a barrel by 3.52pm GMT). US light crude was up 10c at $66.46 a barrel.

US crude stocks fell more than expected last week, while petrol and distillate inventories dropped, the Energy Information Administration said on Wednesday. Crude inventories fell by 4.1-million barrels in the week to June 8, exceeding analysts’ expectations for a decrease of 2.7-million barrels. US estimated petrol demand hit a record high of 9.88-million barrels per day in the week, the data said.

"The demand metrics here are amazing for crude oil and gasoline," said John Kilduff, a partner at Again Capital in New York. "Put the exports of crude on top of that, and it’s just a really bullish report."

US production rose to 10.9-million barrels a day in the week, but Kilduff said the market appeared able to absorb the increase. "It seems like we need almost every barrel of that to keep up with this refining demand."

With output in Russia rising back above 11-million barrels per day in June and Saudi production climbing to more than 10-million barrels per day, supplies from all three top producers are increasing.

Opec and nonOpec producers, including Russia, started pumping less in 2017 to reduce a global crude glut. Prices have risen about 60% over the past year.

Opec and other producers will meet on June 22-23 in Vienna to discuss future production.

"More oil from Opec-plus is the base case," said Bjarne Schieldrop, analyst at Swedish bank SEB.

"Saudi Arabia and Russia have already started to lift production," he said. "Unofficial sources have said Russia will propose to return production back to the October 2016 [level], i.e, removing the cap altogether over a period of three months." Longer term, the market could tighten as demand increases if Opec fails to cover supply shortfalls, the International Energy Agency (IEA) said on Wednesday.

The IEA said it expected global oil demand to grow by 1.4-million barrels per day in 2018 and in 2019, and will top 100-million barrels per day in the fourth quarter of 2018.

"The market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption," the IEA said in its monthly report.

Fund manager Pierre Andurand, from Andurand Capital, was bullish: "Prices will be above $150 in less than two years," he tweeted on Wednesday.