NEW YORK (March 29): Oil prices rose nearly two percent on Wednesday as US crude inventories rose less than expected, supply disruptions continued in Libya and the OPEC-led output cut by producing countries looked likely to be extended.
US crude futures surged to nearly a two-week high after the Energy Information Administration (EIA) reported that crude inventories rose 867,000 barrels last week, nearly half the build expected, as refineries ramped up processing after seasonal maintenance and imports dropped and exports rose.
Brent crude futures rose 90 cents, or 1.8 percent, to US$52.23 a barrel by 12:13 pm EDT (1613 GMT) after hitting a session high of US$52.35, the highest since March 16.
US crude West Texas Intermediate (WTI) futures were up 90 cents, or 1.9 percent, at US$49.27 a barrel after hitting a high of US$49.37, also the highest since March 16.
US gasoline futures surged as much as 2.4 percent to the highest in three weeks after EIA data showed a 3.7 million-barrel drop in gasoline stocks last week, nearly 2 million barrels more than forecast.
"The WTI crude bulls are emboldened by the double whammy of another large increase in refinery utilization rates and a big jump in crude oil export levels," said David Thompson, executive vice-president at Powerhouse, a commodities-focused broker in Washington.
US crude exports nearly dooubled last week to climb over one million bpd, EIA data showed.
US crude exports surged 12 percent in 2016 to 520,000 barrels per day and China became the third-biggest overseas destination for U.S. crude last year, according to EIA data, up from ninth the previous year.
Still supporting prices was Tuesday's declaration of force majeure by Libya's National Oil Corp after production from the western Libyan fields of Sharara and Wafa was blocked by armed protesters, reducing output by some 250,000 barrels per day (bpd).
OPEC member Libya, whose oil sector suffered from the unrest that followed the toppling of Muammar Gaddafi in 2011, was excluded from output cuts agreed last year.
On Tuesday, Iranian Oil Minister Bijan Zanganeh said OPEC and other producing countries were likely to extend their agreement to cut output.
A Reuters survey indicates output from all 13 members of the Organization of the Petroleum Exporting Countries fell by 230,000 bpd in March from February's revised level and indicated members subject to the deal achieved 95 percent compliance.
However, in the United States, shale oil drillers have seized the opportunity to ramp up output and exports.
"What OPEC has done has improved supply demand balance - there's no doubt about that," said Mark Watkins, regional investment manager at US Bank Private Client Group.
"The one wild card in here is that if North American shale producers are the benefactor of OPEC cuts, it makes it much harder to swallow, where you have competitors benefitting at your cost - that's a big issue"
UBS oil analyst Giovanni Staunovo said in a note he expects Brent crude to exceed US$60 over three months before leveling off in six months to US$60 and then retreating to US$57 a barrel in 12 months, spurred by rising US shale production and higher OPEC output.