Oil rose as US crude's August contract expired on Wednesday, with optimism on the outcome of a eurozone summit the following day outweighing concerns over rising product stocks and weak demand. Eurozone leaders will convene in Brussels for an emergency meeting that could bring forth a rescue plan for debt-ravaged Greece.
This pulled world stocks, with the exception of Wall Street, higher and oil followed suit, analysts said. Also setting the stage for the higher settlement, US government data showed a 3.73-million-barrel draw in crude inventories, more than twice what analysts had expected in a Reuters poll.
The drawdown came as refiners stepped up their utilisation to 90.3 percent of capacity, the highest in almost a year. "Oil was pulled back up later in the day as equities rose but it's still trading within range," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.
US crude for August delivery expired and settled at $98.14 a barrel, up 64 cents, or 0.66 percent, after trading from $96.64 to $99.02.
The September crude contract settled at $98.40 a barrel, up 54 cents, or 0.55 percent, after trading from $96.93 to $99.37. Brent crude settled up $1.09 at $118.15 a barrel after reaching a session high of $118.86.
Concerns over weak product demand weighed on prices and briefly dragged US crude into negative territory since the Energy Information Administration's data showed US consumption was lagging.-Reuters
Weekly crude oil inventories fell by 3.73 million barrels to 351.73 million barrels compared with analyst forecasts for a 1.7 million draw, according to data from the US Energy Information Agency. Refining activity picked up by 2.3 percentage points to 90.3 percent of capacity, compared with expectations for a 0.2 percent uplift from a previous drop.
"It looks as if the report is slightly bullish but the distillate build is weakening the report," said Gene McGillian, energy analyst at Tradition Energy, Stamford, Connecticut.
Industry group the American Petroleum Institute on Tuesday reported a 5.2 million barrel drop in domestic crude stocks, surpassing expectations for a 1.7 million barrel fall, as refinery runs rose. A Reuters poll forecast inventories would fall for a seventh straight week due to higher refinery usage and a decline in imports. All but one of 14 analysts polled projected a drawdown in crude, with the average forecast at 1.7 million barrels for the week to July 15.
However some analysts were still very bullish on a longer term basis. Bank of America Merrill Lynch said Brent crude could spike as high as $175 per barrel next year if the global oil market stays tight and raised its forecast for Brent $8 to an average of $102 a barrel for the fourth quarter of 2011.