NEW YORK Oil prices rose as much as 5 percent on Wednesday, with U.S. crude hitting three-month highs after a big gasoline inventory drawdown amid improving demand overshadowed growing record high crude stockpiles.
Speculation that top producers might agree soon to an output freeze also supported crude oil.
Brent crude futures LCOc1 settled up $1.42, or about 4 percent, at $41.07 a barrel.
U.S. crude futures CLc1 finished up $1.79, or 5 percent, at $38.29 a barrel after hitting a three-month high of $38.51.
The U.S. Energy Information Administration said crude stockpiles USOILC=ECI rose 3.9 million barrels last week to reach nearly 522 million barrels, in its fourth week of building to record highs.
But gasoline inventories USOILG=ECI fell 4.5 million barrels, nearly triple forecasts, in the largest weekly draw in almost two years.
U.S. gasoline demand over past four weeks was 7 percent higher than a year ago, the EIA said.
"Gasoline is the star of the show today," said Matt Smith, director of commodity research at New York-headquartered energy data provider ClipperData. "Ongoing strength in demand has yielded a large draw to gasoline inventories despite a rebound in refinery runs."
U.S. gasoline futures RBc1 hit six-month highs, rallying 6 percent. The crack spread for gasoline 1RBc1-CLc1, a measure of profit margin refiners get for turning a barrel of crude into the motor fuel, scaled seven-month highs.
Oil has gained about 50 percent from 12-year lows hit less than two months ago, since OPEC members Saudi Arabia, Qatar and Venezuela, along with non-OPEC exporter Russia, pledged to leave supply at January's levels if others cooperated.
Some analysts said the rally was excessive.
"We feel that values could consolidate well into next week or longer, prior to enough momentum shift to force an ultimate $9-10 crude price cut," said Jim Ritterbusch at Chicago-based oil advisory firm Ritterbusch & Associates.
Energy consultancy Wood Mackenzie said it expected this year's average price of crude to be lower than last year's, reflecting the glut.
Oil rallied earlier in the day after an Iraqi oil official told a state newspaper that producers in and outside of OPEC plan to meet in Moscow on March 20 to discuss the output freeze.
Russia's energy ministry, however, said no date or place had been set.
Credit ratings agency Moody's warned of more output declines if oil producers defaulted on debt because of low prices. Reuters exclusively reported that Saudi Arabia was seeking its first significant foreign borrowing in over a decade to help cover a record budget deficit from weak crude prices.
(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein in SINGAPORE; Editing by Alden Bentley and Marguerita Choy)
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Updated Date: Mar 10, 2016 03:00 AM