("OIL FUTURES: Crude Turns Higher After Inventory Data," at 11:20 a.m. ET, misstated Iran's current production in the 13th paragraph. The error also ran at 9:46 a.m. ET. The correct version follows:)
--Crude reverses course following inventory data
--EIA: Oil inventories fall 200,000 barrels, refinery runs climb
--OPEC expected to keep production elevated
By Dan Strumpf
NEW YORK--Oil futures turned higher after the U.S. government said oil inventories fell last week and demand rose to its highest level since August.
Light, sweet crude for July delivery rose 48 cents, or 0.6%, to $83.80 a barrel on the New York Mercantile Exchange, after falling as low as $82.15 earlier in the day.
Brent crude on ICE Futures Europe jumped $1.06, or 1.1%, to $98.20 a barrel.
Futures shed their earlier losses after the Energy Information Administration said U.S. oil inventories last week fell 200,000 barrels. Stocks of both gasoline and distillates dropped sharply, while refineries ratcheted up operations.
"The draws across the board are probably limiting the propensity to sell even further, considering we're $20 lower than just a month ago," said Kyle Cooper, managing partner at IAF Advisors in Houston.
Gasoline inventories last week fell 1.7 million barrels, while stocks of distillates, including heating oil and diesel, dropped 100,000 barrels. Refineries raised output by 0.1 percentage to 92% of capacity.
Analysts expected oil inventories to fall a larger 1.6 million barrels last week, according to a survey of analysts by Dow Jones Newswires. But gasoline inventories were seen rising 600,000 barrels, while distillates were expected to rise 900,000 barrels. Refinery runs were seen falling 0.1 percentage point to 90% of capacity.
The EIA's indirect measure of product demand rose 6.5% to its highest level since August, bucking a trend of weakening demand for petroleum products in the U.S.
Oil market watchers closely follow the EIA's weekly inventory survey for cues on supply and demand in the world's biggest oil consumer. Inventories last month were at their highest level since 1990, amid persistently weak demand and sluggish economic growth.
Crude-oil prices have fallen more than 20% from their peak in the spring, as the deepening euro-zone crisis has spurred fears of slowing growth worldwide, and as demand remains weak in the U.S., the world's biggest consumer.
Later this week, traders will shift their attention to a meeting of the Organization of Petroleum Exporting countries in Vienna. Saudi Arabia is widely expected to rebuff calls from other members to rein in elevated production at Thursday's meeting.
"We're just waiting for the OPEC meeting to fall apart," said John Kilduff, founding partner at Again Capital in New York. "I think that's going to end in disarray...and the Saudis will stand firm on their willingness to pump."
Saudi Arabia has boosted production in recent months amid increasingly stringent sanctions on Iran over the country's nuclear program. Iranian production has fallen to around 200,000 barrels a day, from around 3.5 million barrels a day at the end of last year, according to the Energy Information Administration.
Still, other members, including Libya and Iraq, have seen production return significantly over the last year.
The International Energy Agency on Wednesday said the oil market is looking "better supplied" than earlier this year thanks to higher OPEC production. But sanctions and an upcoming European Union embargo on Iranian oil raise the risk of a tighter market this summer.
Front-month July reformulated gasoline blendstock, or RBOB, recently rose 3.07 cents, or 1.2%, to $2.6809 a gallon. July heating oil rose 1.64 cents, or 0.6%, to $2.6379 a gallon.
--Selina Williams contributed to this article
Write to Dan Strumpf at firstname.lastname@example.org