NEW YORK (Reuters) - Oil rallied for a second straight day on Wednesday, with U.S. crude nearing a one-month high and gasoline hitting its highest price since November, as a big U.S. stocks drawdown boosted the outlook for summer fuel demand.
"There's no mistaking it: There's pretty good demand for both crude oil and gasoline in the United States now and it could stay this way the next couple of months," said John Kilduff, partner at New York energy hedge fund Again Capital.
The U.S. Energy Information Administration (EIA) reported that crude oil inventories shrank by 6.8 million barrels last week, four times more than forecast by analysts in a Reuters poll.
The largest stockpile drop since last July came as refining demand for crude rose amid higher gasoline consumption. Inventories at the Cushing, Oklahoma delivery point for U.S. crude also fell although stockpiles of distillates, which include diesel and heating oil, showed a build. [EIA/S]
"The distillate category was a bit of a drag on the inventory and demand front, but not enough to diminish the overall strength of the report," Kilduff observed.
Oil futures, which rose 3 percent on Tuesday in anticipation of the draws, extended gains on the data. Later, profit-taking pulled prices off session highs.
U.S. crude CLc1 settled up $1.29, or 2.1 percent, at $61.43 barrel, after hitting a May 13 high of $61.82.
Global crude benchmark Brent LCOc1 settled at $65.70, up 82 cents, or 1.3 percent. Its session peak was $66.36.
Gasoline futures for July RBc1 settled up 3.3 percent at $2.1464 per gallon. The session high of $2.1506 was the highest since last Nov. 10.
On Tuesday, the EIA said it expected U.S. oil output to decline in the second half of this year. For 2016, it projected a drop of 160,000 barrels per day in U.S. production, revising its previous forecast for a rise.
On Wednesday, producer group OPEC also said it expected non-OPEC supply to decline in the second half.
Some in the market remained pessimistic that demand would grow enough to drain a continued glut in global oil supply.
Jim Williams, energy economist at WTRG Economics in London, Arkansas, noted that U.S. crude stockpiles were at least 20 percent higher now than a year ago.
"The draw numbers are bullish. That's the short takeaway," Williams said, referring to Wednesday's EIA data.
"But medium and long-term, we still need to be rid another 85 million barrels of crude that we didn't have a year ago. I think it will be a summer of volatility."
Additional reporting by Karolin Schaps in London and Henning Gloystein in Singapore; Editing by David Clarke, Chris Reese and David Gregorio