Oil prices pared losses on Thursday, as government data showing a larger-than-expected reduction in stockpiles outweighed increasing output from major oil producers.
Light, sweet crude for February delivery settled down 2 cents at $63.95 a barrel on the New York Mercantile Exchange, after fluctuating between gains and losses throughout the session. Brent, the global benchmark, edged down 7 cents, or 0.1%, to $69.31.
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On Thursday, the U.S. Energy Information Administration reported that the amount of crude oil in storage declined by 6.9 million barrels in the week ended Jan. 12, exceeding analyst expectations on average for a 2.3 million barrel draw.
The drop also outpaced the estimated 5.1-million barrel decrease from the American Petroleum Institute, an industry group.
The latest figures reinforced optimism that a global glut that weighed on prices for three years is finally diminishing, a sentiment that has in recent weeks boosted crude prices to the highest level since 2014.
"That becomes supportive to the energy complex and energy prices," said Tony Headrick, an analyst with CHS Hedging. In addition, sizable draws from Cushing, Okla. a key delivery and pricing point for U.S. oil, "are a blatant bullish consideration," he said.
However, concerns about climbing production muted the market's reaction to the bullish inventory data, analysts said.
In a monthly market report, the Organization of the Petroleum Exporting Countries said Thursday that its crude production rose by 42,000 barrels a day in December, to average 32.42 million barrels a day.
OPEC, along with several major producers outside the cartel including Russia, agreed in November to extend efforts to limit output, in an attempt to reduce excess supplies and bring global stockpiles back down to the five-year average level.
Meanwhile, U.S. production rose by 258,000 barrels a day to 9.75 million in the week ended Friday.
"They continue to up the ante and up the game, they continue to produce more and more and more," said Donald Morton, vice president at Herbert J. Sims & Co., who runs an energy trading desk.
But as inventories have declined and demand for fuel has grown, the threat of U.S. shale has become less pronounced.
"To say that there has been a paradigm shift in sentiment in the oil market would be an understatement," Energy Aspects analysts wrote in a note this week. "The narrative has now shifted from infinite U.S. shale production at $55 to how much does shale need to grow by to fill the gap created by record demand growth."
Stocks of distillates, including diesel and heating oil, fell by 3.9 million barrels last week, exceeding analyst expectations for a 100,000-barrel build. Gasoline stockpiles rose by 3.6 million barrels, compared with estimates for a 2.6 million-barrel increase.
Gasoline futures climbed 1.4% to $1.8835 a gallon, and diesel futures fell 0.4% to $2.0617 a gallon.
Christopher Alessi contributed to this article.
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(END) Dow Jones Newswires
January 18, 2018 15:22 ET (20:22 GMT)