Oil prices dip but still near 5-month high after US crude storage build

NEW YORK: Oil prices edged lower on Wednesday after U.S. government data showed a surprise build in crude inventories, but futures hovered near five-month highs as OPEC-led output cuts and U.S. sanctions kept the supply outlook tight.

Crude stocks in the United States rose 7.2 million barrels in the latest week, the Energy Information Administration said. Analysts had forecast a decrease of 425,000 barrels.

Brent futures fell 36 cents to $69.01 a barrel by 1:10 p.m. EST (1700 GMT). Their session high was $69.96, the strongest since Nov. 12, when they traded above $70.

U.S. West Texas Intermediate crude fell 19 cents to $62.39 a barrel, having briefly hit $62.99, the highest since Nov. 7.

Crude stocks at the Cushing, Oklahoma, delivery hub  rose by 201,000 barrels, EIA said.

"The report was bearish due to the large crude oil inventory build," said John Kilduff, a partner at Again Capital Management in New York. "It appears to be a function of diminished exports for a second week in a row, and a low refinery utilization rate."

Despite the large build in U.S. crude stocks, market participants said prices were positioned to move up on tightening global supply and signs of demand picking up.

"Those are the issues that have supported the market here," said Bob Yawger, director of futures at Mizuho in New York. "At the end of the day, this market is really bulled up and it wants to trade higher."

Crude oil futures were supported by ongoing efforts by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia to reduce oil output by about 1.2 million barrels per day (bpd) this year.

Supply from OPEC countries hit a four-year low in March, a  Reuters survey found this week.

Oil production from Russia fell to 11.3 million bpd last month, but missed the country's target under the supply deal.

In a signal that supply may tighten more, a U.S. official said on Tuesday that three of eight countries granted waivers by Washington to import oil from Iran had cut such purchases to zero, adding that improved oil market conditions would help reduce Iranian crude exports further.

But despite also being under U.S. sanctions, Venezuela's state-run energy company, PDVSA, kept oil exports near 1 million bpd in March, PDVSA documents and Refinitiv Eikon data showed.

Signs of progress in U.S.-China trade negotiations and positive Chinese and U.S. factory activity data in recent days has also helped market sentiment by easing fears about weakening global oil demand.