US oil surges 3.77 pct, posts highest close this year

Crude inventories up 2.1 million
Saudi oil production pressure
Kuwaiti oil workers end strike, oil prices fall

U.S. oil prices closed at new 2016 highs on a smaller-than-expected U.S. crude build and speculation that major oil producers were meeting in Russia in May for another attempt at curtailing output.

Moscow, however, denied media reports of such an impending meeting. Just on Sunday, Russia and OPEC nations failed to reach an agreement on freezing production at a meeting in Doha, Qatar.

"There is no such agreement," Russian Energy Minister Alexander Novak was quoted as saying by RIA news agency, referring to the meeting supposedly to be held in Russia.

Russia also said earlier on Wednesday that it was ready to ramp up its oil output in a further fallout among major oil producers after the freeze deal failure.

Oil well pump jacks located in Almond Orchard located over the Monterey Shale in San Joaquin Valley.
Energy M&A stalls as buyers see little they want
Pipelines and oil storage tanks in Cushing, Okla.
Citi: Here’s why oil prices may rise

Brent futures were up $1.74, or 3.9 percent, at $45.77 a barrel, having earlier touched $45.82, the highest level since Nov. 26.

U.S. crude settled 3.77 percent higher, or $1.55, at $42.63 a barrel.

Oil prices rebounded after the U.S. Energy Information Administration said crude stocks rose 2.1 million barrels last week, compared with forecasts for a 2.4 million-barrel build and industry group American Petroleum Institute's data showing a 3.1 million-barrel rise.

U.S. gasoline stockpiles ticked down slightly, while distillate fuel stocks fell by 3.6 million barrels, EIA said. Production in U.S. oil fields continued its gradual decline, the data showed.

"It's overall mixed and slightly supportive, with total stocks of refined products and crude oil combined declining slightly," Dominick Chirichella, senior partner at the Energy Management Institute in New York said, commenting on the EIA data.

Prices of ultra-low sulfur diesel, also known as heating oil, rose 4 percent and hit 4½-month highs after the unexpected drop in stockpiles of distillates, which include diesel.

"Distillates are the standout bullish element of the report and gasoline is the disappointment," said Matt Smith, director of commodity research at New York-headquartered energy data provider ClipperData.

The Trans-Alaska Oil Pipeline, as it zigzags across the landscape.
Painful transition for energy states as oil revenues evaporate

Crude prices had initially tumbled as the Kuwaiti oil and gas industry called off a three-day strike and reports later said six supertankers had lined up at Kuwait's crude export terminal to load oil. Kuwait has also raised its oil output to 1.6 million barrels per day (bpd) from 1.1 million on Sunday.

The country produced 2.8 million bpd at the end of March.

The end of the strike had revived the bearish mood brought on by the failure of major producers on Sunday to agree to freeze output and help overcome a market imbalance that has caused a slump in prices since mid-2014.

"Kuwait is moving back to full production, and we expected that oil would come off more after the Doha deal fell apart, so we're seeing the impact of that now," said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

— CNBC's Tom DiChristopher contributed to this story.