LONDON: Brent crude oil rose above $67 a barrel towards five-month highs on Wednesday after US crude stockpiles fell for a second straight week, suggesting the world's biggest oil market is rebalancing.
US crude oil stocks fell by 2.2 million barrels to 484.84 million barrels last week, the Energy Information Administration (EIA) said. Stocks at the key delivery hub of Cushing, Oklahoma fell by 990,000 barrels to 60.68 million barrels.
"The report is clear cut in its bullish message to the market," said John Kilduff, partner at Again Capital LLC.
Brent for June was up 41 cents at $67.27 a barrel by 1448 GMT. Brent hit a high of $69.63 on May 6, its strongest since December. US crude was up 17 cents at $60.92 a barrel after reaching an earlier high of $61.83.
Prices also gained some lift after the dollar index plunged to a three-month low, following weak retail sales data for April. Dollar-traded commodities such as oil benefit from a weaker US unit as it makes them cheaper for holders of other currencies.
"Any recent dollar weakness is very supportive for the market," said Myrto Sokou, senior analyst at Sucden Financial.
Oil shrugged off a bearish report from the International Energy Agency (IEA), which said global supplies had increased, outpacing small rises in oil demand.
Many analysts, including the IEA, say global oil supply is rising as members of the Organization of the Petroleum Exporting Countries (OPEC) pump record levels in a battle for market share.
"Despite tentatively bullish signals in the United States, and barring any unforeseen disruption elsewhere, the market's short-term fundamentals still look relatively loose," said the IEA, which coordinates energy policies of industrial nations.
Global oil production exceeds demand by about 2 million barrels per day (bpd), or more than 2 percent.
The IEA cut its estimate of demand for OPEC oil this year by 300,000 bpd at the same time as raising its forecast for non-OPEC crude supply by 200,000 bpd.
But the oil market is still more concerned by evidence of a sharp slowdown in US production, particularly of shale oil.
The US government has cut its 2015 forecast for crude output growth to 530,000 bpd from 550,000 bpd and 2016 growth to 20,000 bpd from 80,000 bpd.
"Lower oil prices are already showing signs of demand stimulation, especially in transportation fuels," Morgan Stanley analysts said in a note.
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