SINGAPORE: Brent futures rose towards $110 a barrel on Wednesday on expectations a fall in US gasoline stockpiles pointed to a healthy outlook for demand from the world's top oil consumer and that tensions in Iraq will worsen and crimp supply.
Investors are waiting for confirmation of industry data that showed US gasoline stocks posted a surprise fall last week, and are also keeping an eye on the outcome of a meeting of producer group OPEC, keeping oil in a tight range through the day, according to analysts.
Brent futures had gained 23 cents to $109.75 a barrel by 0445 GMT, after shedding 0.4 percent in the previous session.
US oil added 14 cents to $104.49.
It rose to an intraday high of $105.06 in the previous session, inching close to the high for the year at $105.22, touched in early March.
"Oil demand is likely to be stronger, especially in the second half of the year, driven by higher consumption in the United States and China," said Victor Shum, vice-president of energy consultancy IHS Energy Insight.
"There is more supply as output in North America ramps up, but that is only offsetting the fall in output in Libya and elsewhere. Overall, the oil market looks well supported."
The market is watching the unfolding crisis in Iraq, where an al Qaeda splinter group seized control of the city of Mosul.
The United States said it would support a strong, coordinated response to the aggression, while Oil Minister Abdul Kareem Luaibi aimed to assure markets that any state of emergency would not impact oil exports.
"The stakes are high for the oil market," analysts at Barclays said in a note. "A big question for the oil sector in Iraq is whether extremist groups will seek to expand their attacks from the Kirkuk-Ceyhan pipeline to other energy infrastructure." Gasoline stocks fell by 441,000 barrels compared with expectations for a 843,000-barrels gain, data from the American Petroleum Institute showed.
That helped offset the impact from a rise in crude stocks by 1.45 million barrels, versus forecasts of a decrease of 1.9 million barrels.
The market is now waiting official data from the Department of Energy's Energy Information Administration (EIA) for confirmation and to assess the country's consumption outlook.
Improved demand comes against a backdrop of rising supplies. Total US crude oil production in May reached its strongest levels in 26 years, hitting an average of 8.4 million barrels per day (bpd), the EIA said in a monthly report.
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