Oil prices extend gains as United States crude inventory falls

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"Spot Brent crude oil prices averaged $3.36 per barrel more than WTI prices in 2017 compared with just $0.40 per barrel more in 2016, providing a price incentive to export USA crude oil into the global market", said Matt Stanley, a fuel broker at Freight Investor Services worldwide in a note.

Thanks to the high drilling activity, USA crude oil production has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia.

Oil's rise defied a slump in global stock markets, which fell in response to worries about a trade stand-off between the United States and China.

US West Texas Intermediate (WTI) crude futures were at $62.31 a barrel at 1.28am GMT, up 25c, or 0.4%, from their previous close.

But the confident mood in the oil market has been tempered by USA crude production, which climbed to a record 10.4 million barrels per day last week, putting US output ahead of Saudi Arabia and closing in on Russia's 11 million bpd. It added to signs that production cuts by OPEC and Russian Federation are successfully clearing a global glut.

US production growth has partly been countered by the deal to cut output by the Organization of the Petroleum Exporting Countries, Russia and their allies.

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Diminished output from Venezuela and Middle East tensions are also driving oil prices higher.

The decline was driven by lower crude imports and higher refinery runs.

Morgan Stanley predicted Brent would hit $75 a barrel in the third quarter as seasonal demand picks up. Analysts had forecast a gain of 3.25 million barrels, and only two of the 12 analysts had expected a decline of a lesser magnitude.

The overall bullish mood is being somewhat tempered by U.S. crude production, which climbed to a fresh record of 10.4 million bpd last week, putting the United States ahead of top exporter Saudi Arabia and within reach of Russia's 11 million bpd. The producer group is said to be discussing changes to the way it measures the impact of production cuts.

"Ahead of that $66 level in WTI, there's some profit-taking to test whether you're really in a new technical uptrend or if you're still in a trading range", said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle.

Gasoline stocks fell by 1.7 million barrels, while distillate stockpiles, which include diesel and heating oil, fell by 2.0 million barrels, said the EIA. Still, while stockpiles have declined, U.S. oil production has continued to surge, with output hitting a fresh record last week.