Oil prices rose about 1 percent on Wednesday, boosted by signs of strong US demand for distillate products and tightening global crude supply, but gains were capped by a rising US dollar and ongoing concerns about a global economic slowdown.
Brent crude LCOc1 futures were up 68 cents, or 1.1 percent, at $62.66 a barrel as of 1:15 p.m. EST (1815 GMT). The benchmark earlier fell to a session low of $61.05. US West Texas Intermediate (WTI) crude CLc1 futures gained 43 cents, or 0.8 percent, to $54.09 a barrel, up from a session low of $52.86.
US government data on Wednesday showed that domestic crude inventories rose by less than expected last week even as refineries hiked output. Stocks increased 1.3 million barrels in the week ended Feb. 1, compared with analysts' expectations for an increase of 2.2 million barrels.
Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles fell a greater-than-expected 2.3 million barrels. "The report was modestly supportive, as crude oil inventories held steady, in the face of decent demand from refiners," said John Kilduff, a partner at Again Capital Management. "Distillate demand was strong, helping to give the report a somewhat bullish tone."
Market participants have focused on signs of tightening global crude supply after the Organization of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output. The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered almost three-quarters of its pledged cuts already, a Reuters survey showed last week.
US sanctions on Venezuela's state oil company could also lift prices, though they have yet to trigger any sharp increase. The sanctions aim to block US refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro.
Venezuela, like fellow OPEC members Iran and Libya, has been exempted from production curbs under the OPEC+ deal on expectations that its output faces involuntary downward pressure in 2019. A stronger US dollar limited gains on Wednesday. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.