Oil Rises to Seven-week High on Lower Supply

Crude prices were steady Thursday, with the market pressured by increased U.S. production despite signs of a drawdown in stocks.

Brent crude, the global oil benchmark, was up 0.1% to $49.75 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.06% at $47.35 a barrel.

Data from the U.S. Energy Information Administration on Wednesday showed U.S. production rose by 32,000 barrels a day in the week ended July 14 to its highest level in two years.

Accelerating U.S. production continues to be a major threat to the ongoing effort from the Organization of the Petroleum Exporting Countries and its allies to drain a years-old global oil glut.

That, combined with increased Libyan oil production, is serving as a cap for oil prices Thursday, said Carsten Fritsch, a Commerzbank analyst.

Investors are waiting for the oil cartel to meet next Monday in St. Petersburg to see whether Nigeria and Libya, two member countries exempt from OPEC's production curtailment plan, will possibly be included.

The effort led by OPEC to reduce global output by 2% has seen limited results this year as rising production from the U.S. has been helping offset the cuts.

Still, oil prices are finding support as more evidence of a gradual supply draw are emerging. Data from the U.S. Energy Information Administration showed U.S. stockpiles fell for a 13th week out of the past 15. Weekly decreases in gasoline and distillate stocks also surpassed estimates.

The data also showed crude oil imports from Saudi Arabia fell to 524,000 barrels a day in the week ended July 14, the lowest level since June 2010. That helps prices, signaling to the market that the cuts from OPEC are surfacing, said Warren Patterson, commodity strategist at ING Bank.

"Overall the data from the EIA was very positive and bullish,"Mr. Patterson said.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was down 0.2%, at $1.61 a gallon. ICE gasoil changed hands at $461.00 a metric ton, up 1.1% from the previous settlement.

Crude prices rose to a seven-week high Thursday, with another day of gains coming from a decline in U.S. stockpiles.

U.S. crude for August delivery recently traded up 10 cents, or 0.2%, to $47.22 a barrel on the New York Mercantile Exchange. It peaked Thursday at $47.55 a barrel, an intraday high dating back to June 7.

The August contract expires at settlement, and the more actively traded September contract recently gained 12 cents, or 0.3%, to $47.44 a barrel. Brent, the global benchmark, gained 40 cents, or 0.2%, to $49.90 a barrel on ICE Futures Europe.

U.S. oil stockpiles fell by 4.7 million barrels last week, the U.S. Energy Information Administration had said Wednesday. And big drawdowns on refined fuels including gasoline brought total stockpiles of oil and petroleum products down by 10.2 million barrels. That initially sent the market near its seven-week high, and then kept fueling a rally into a second session Thursday, brokers and analysts said.

U.S. oil inventories have now dropped in 13 of the last 15 weeks. That has helped bolster confidence that production cuts by the Organization of the Petroleum Exporting Countries and other major producers are having an impact on bloated U.S. stockpiles.

Analysts at Piper Jaffray Cos.' Simmons & Co. International on Thursday called the most recent drawdowns "massive." And at this pace, an overhang in storage can "diminish quickly," said analysts at energy investment bank Tudor, Pickering, Holt & Co.

"The overall trend remains favorable," Simmons analyst Guy Baber said in the firm's morning note. "We expect inventories to continue bending lower in coming weeks, perhaps lending some support to crude."

The International Energy Agency said last week it raised its expectations for global demand growth. Demand has picked up since around Memorial Day, significantly reducing a surplus in storage and likely boosted by a strengthening U.S. economy, analysts have said.

Gasoline stockpiles fell by 4.4 million barrels a day last week. The amount of gasoline being stored in the U.S. now stands about 10 million barrels lower than this time last year, even as refiners have been churning out the fuel at high rates.

"It's a bull market on products that's dragging crude along," said Scott Shelton, broker at ICAP PLC. "It kind of snuck up on everyone."

The effort led by OPEC to reduce global output by 2% has seen limited results this year as rising production from the U.S. has been helping offset the cuts. But Saudi Arabia has responded in recent weeks by pushing to reduce exports, especially into the U.S.

The EIA data showed crude oil imports from Saudi Arabia fell to 524,000 barrels a day in the week ended July 14, the lowest level since June 2010. That helps prices, signaling to the market that the cuts from OPEC are surfacing, said Warren Patterson, commodity strategist at ING Bank.

"Overall, the data from the EIA was very positive and bullish," Mr. Patterson said.

Gasoline futures recently gained 0.2% to $1.6194 a gallon. Diesel futures gained 1% to $1.5675 a gallon.

Write to Timothy Puko at tim.puko@wsj.com and Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

July 20, 2017 11:47 ET (15:47 GMT)