US crude settles at $58.58, highest close since Dec 11

Demand remains the only swing factor in oil prices: Expert
Demand remains the only swing factor in oil prices: Expert

U.S. crude settled at the highest level since Dec. 11 after government data showed the first crude stock draw in five months at the U.S. Cushing, Oklahoma hub suggested an oil glut may be starting to ease.

U.S. crude settled up $1.52 at $58.58, having earlier touched $59.33, its highest level since Dec. 12. The benchmark West Texas Intermediate has risen about 40 percent from its March 18 low of $42.03.

Brent crude oil was trading 1.13 higher at $65.76 a barrel by 2:36 p.m. EDT (1836 GMT), after rising to $66.72, the highest level since Dec. 9.

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The Energy Information Administration reported a smaller-than-expected rise last week in crude inventories throughout the United States also aided sentiment, although some traders felt the market was ignoring bearish elements like higher production.

U.S. crude inventories rose last week to hit a record high for the 16th straight week. But the build of 1.9 million barrels was smaller than the 4.2 million barrels cited by industry group the American Petroleum Institute and a forecast of 2.3 million in a Reuters poll.

Crude stocks at Cushing, the delivery point for U.S. crude futures, fell 514,000 barrels, the first decline since November. U.S. weekly crude production also rose slightly.

Can oil comeback continue?
Can oil comeback continue?

"Inventories at Cushing did finally draw down due to strong refinery demand, and that is supportive, since it will allay the fears of many that the operational storage capacity could be reached," said John Kilduff, partner at Again Capital LLC in New York.

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Even so, Gene McGillian at Tradition Energy in Stamford, Connecticut, said the market "seems to be picking and choosing what to respond to, like ignoring the gains in production to focus on the draws and smaller builds".

Oil prices have risen some 20 percent in April for their strongest recovery since the selloff that began in June last year. The rebound was partly on the notion that a global supply glut that drove prices down by half since last summer may be easing with higher demand ahead of the peak driving season in the United States.

Oil got a boost earlier as the dollar dropped to an eight-week low after data showed the U.S. economy grew much more slowly than expected in the first quarter. A weak dollar makes crude oil more affordable to buyers who hold other currencies.

The U.S. economy grew just 0.2 percent in the first quarter, down sharply from the fourth quarter's 2.2 percent clip and the weakest reading in a year.

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Prices had dipped overnight following news that King Salman of Saudi Arabia had altered the line of royal succession in the kingdom in a dramatic reshuffle.

Saudi reshuffles often move oil prices as stability in the world's biggest oil exporting country is key to global supplies.