--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 20,000 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 dan.strumpf@dowjones.com