C Citigroup Inc

Oil prices pared gains Wednesday after data showed crude-oil stockpiles grew more than expected in the latest week.

Light, sweet crude for June delivery gained 65 cents, or 1.5%, to $44.30 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 35 cents, or 0.8%, to $45.32 a barrel on ICE Futures Europe. Both benchmarks had been up more than 2% ahead of the report from the U.S. Energy Information Administration.

The agency said crude stockpiles rose by 2.8 million barrels in the latest week, a new weekly record high, while analysts expected an increase of 1.2 million barrels.

Oil prices have jumped by more than 60% since their lows earlier this year as traders speculate a nearly two-year downturn in prices is leading to slowing production and a more balanced market. Many think that trend is still propping up oil from small signs of decreasing supply and increasing demand around the world.

"If you can get demand to continue to pick up, at least on the gasoline side, that could be a supporting force," said Tariq Zahir, who oversees $6 million as managing member of Tyche Capital Advisors LLC

Traders are also looking at several other forces that could threaten oil supply, said Ric Navy, senior vice president for energy futures at brokerage R.J. O'Brien & Associates LLC.

Wildfires have led to evacuation orders in northern Alberta, forcing one of Canada's largest oil-sands companies to reduce production. Dry weather in Venezuela could reduce its ability to make hydroelectricity, forcing it keep more of its oil to burn for electricity, Mr. Navy said. And the semiofficial Fars news agency in Iran is reporting the country's military is threatening to block some vessels from the Strait of Hormuz, the narrow passage through which about a third of the world's seaborne oil shipments pass.

It could become an important day for a market that has often been guided by momentum, Mr. Navy said. Several analysts have said the rally has gone too far too fast, warning a retreat is likely coming soon. Some had thought that retreat might already be under way after two straight losing sessions to star the week.

"It's important to sustain this rally," Mr. Navy said. "If you cannot sustain it, it will add more fuel to say it should go further down."

Georgi Kantchev contributed to this article.

Write to Timothy Puko at tim.puko@wsj.com

(END) Dow Jones Newswires

May 04, 2016 11:25 ET (15:25 GMT)

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