NEW YORK Oil prices rose about 1 percent on Wednesday, hitting new 2016 highs, as the market focused on large drawdowns in U.S. refined fuel inventories and ignored a surprise build in crude stockpiles.
Brent and U.S. crude's West Texas Intermediate (WTI) futures advanced closer to the $50 a barrel target after the mixed supply-demand data from the U.S. Energy Information Administration (EIA).
U.S. crude inventories rose 1.3 million barrels in the week to May 13, compared with analysts' expectations for a decrease of 2.8 million barrels and a 1.1 million-barrel drawdown reported on Tuesday by a trade group, the American Petroleum Institute.
Crude stocks at the Cushing, Oklahoma, delivery hub for WTI futures also rose, by 461,000 barrels, to record highs.
The market's attention, however, was on a gasoline stockpile drop of 2.5 million barrels after analysts had expected a decline of 150,000 barrels.
Distillate stockpiles, which include diesel and heating oil, slumped by 3.2 million barrels, versus expectations for a 642,000-barrel drop.
"Overall, the strength in refined products and the seasonality heading into the peak U.S. driving season should give a bullish bias to today's data points," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
WTI's front-month contract rose 49 cents, or 1 percent, to $48.80 a barrel by 11:52 a.m. EDT (1552 GMT). The session high was $48.95 - its highest since mid-October.
Brent's front-month was up 37 cents at $49.65 a barrel. It reached $49.85 earlier, its highest since November.
Oil has rallied since the start of this week on expectations of lower U.S. crude stockpiles, a new wildfire threat on Canadian oil supplies and worries about outages in Libya and Nigeria.
Prices are up more than 80 percent from 12-year lows of around $27 for Brent in January and about $26 for WTI in February.
Even so, analysts worry about another major oil glut, when an estimated crude oversupply of 1.5-2.0 million barrels per day (bpd) in mid-2014 forced prices down from above $100 a barrel.
"People are cautious and still wonder about the Q4’2016/H1 2017 balance," said analysts at Vienna-based JBC Energy, who forecast a current oversupply of 800,000 bpd.
Data from Iran showed its oil exports were also recovering faster than expected. Iran, the world's fourth largest oil producer and number two exporter in the Organization of the Petroleum Exporting Countries, is set to ship 2.1 million bpd in May, nearly 60 percent above their level a year ago.
(Additional reporting by Ahmad Ghaddar in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy)
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Updated Date: May 19, 2016 01:15 AM