Oil rises again on view that supplies should tighten

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Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016.

NEW YORK - Oil prices rose again on Wednesday, up another 1.5 percent 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 in the week ending March 24 as more refineries geared up after seasonal maintenance and imports dropped. The build was less than the 1.4 million barrel increase analysts had expected.

Front-month Brent crude futures rose 69 cents or 1.3 percent to $52.02(R679.63) a barrel by 11:04 a.m. EDT (1504 GMT) after hitting a session high of $52.15, the highest since March 21. US crude futures were up 71 cents or 1.5 percent at $49.08 a barrel after hitting a high of $49.18, the highest since March 17.

US gasoline futures surged 2.2 percent to the highest in three weeks after EIA data showed a 3.7 million barrel drop in gasoline stocks last week, much steeper than forecast.

"Higher demand for gasoline and distillates in the US contributed toward larger-than-expected drawdowns in their stockpiles," said Abhishek Kumar, Senior energy analyst at Interfax Energy’s Global Gas Analytics in London.

"Improving refinery utilisation rates in the country will help cater for rising demand for the two refined products in the country over the coming weeks."

Also supporting prices, oil production from the western Libyan fields of Sharara and Wafa was still blocked by armed protesters, reducing output by some 250,000 barrels per day (bpd). The National Oil Corp declared force majeure on Tuesday.

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.

However, in the United States, shale oil drillers have seized the opportunity to ramp up output and exports.

UBS oil analyst Giovanni Staunovo said in a note he expects Brent crude to exceed $60 a barrel over three months before levelling off in six months to $60 and then retreating to $57 a barrel in 12 months, spurred by rising US shale production and higher OPEC output.

China became the third-biggest overseas destination for US crude in 2016, according to EIA data, up from ninth the previous year.