U.S. crude oil futures rose for a third straight day on Thursday, extending big gains in the previous session on plunging American oil stockpiles and indications that OPEC will not waiver in its bid to drain oversupply.
Crude futures recovered on Wednesday after Saudi Arabia's influential oil minister brushed off pressure from President Donald Trump to "take it easy" on price-boosting production cuts. Trump's warning to Saudi Arabia and its fellow OPEC members caused oil prices to sink more than 3 percent on Monday.
But on Thursday, traders said the oil market was dealing with several headwinds, as U.S.-China trade tensions persisted, the Chinese economy showed signs of slowing and record U.S. production undermined OPEC-led output curbs.
U.S. West Texas Intermediate crude rose 28 cents, or half a percent, settling at $57.22, just a few cents shy of last week's 2019 closing high.
U.S. crude week-to-date performance
Brent crude fell 36 cents, or half a percent, to $66.03 per barrel on Thursday, after rising 1.8 percent in the previous session.
Factory activity in China, the world's biggest oil importer, shrank for a third month in February as export orders fell at the fastest pace since the financial crisis a decade ago.
"The real critical center for crude oil is Asia and Asia demand and the economic data out of Asia has been quite poor," John Kilduff, found partner at energy hedge fund Again Capital told CNBC's "Futures Now." "I'm not certain that even striking a trade deal with China is going to improve that country's fortunes."
U.S. Trade Representative Robert Lighthizer dampened expectations of a swift resolution to the trade dispute between China and the United States, after progress on key sticking points reported earlier this week had raised hopes. Lighthizer said issues with China were "too serious" to be resolved with promises from Beijing to purchase more U.S. goods and any deal needed to include a way to ensure commitments were met.
EIA's first monthly reading on U.S. production for December showed a slight drop from the previous month to about 11.85 million bpd. However, that was still higher than EIA's weekly reports suggested two to three months ago.
U.S. crude production rose more than 2 million barrels per day in the last year to a record 12.1 million bpd, according to preliminary weekly figures released by the Energy Information Administration on Wednesday.
The production figures were offset by a surprise 8.6-million-barrels drop in the nation's stockpiles of crude oil, despite inventories at the closely watched storage hub at Cushing, Oklahoma rising by 1.7 million barrels.
"The data were undeniably bullish yesterday, though a second straight big build at Cushing bears watching," Paul Sankey, oil equity analyst at Mizuho Securities, said in a research note. "But an 8.6Mbbl US crude draw is nothing to shake a stick at, we think it is the biggest February draw in history."
The U.S. Energy Department on Thursday announced it will withdraw 6 million barrels from the nation's Strategic Petroleum Reserve and sell them into the market for delivery between April and May. Over a 60-day delivery period, that pencils out to about 100,000 bpd of extra supply in a market that is expected to consume 100 million bpd this year.
"It doesn't seem like very much to me in the scheme as things," said Andrew Lipow, president of Lipow Oil Associates.
Supply cuts by OPEC and its allies, such as Russia, a group known as OPEC+, have offered support since January. That reduction helped drive down U.S. commercial crude inventories last week.
"Crude imports into the U.S. fell 1.6 million bpd last week, to a two-decade low," ANZ bank said on Thursday.
Despite Trump resuming his pressure campaign on OPEC and Congress advancing legislation to hobble the producer group, OPEC Secretary General Mohammed Barkindo on Thursday highlighted the interdependence of OPEC producers and U.S. drillers.
"The decisions that OPEC took, together with our non-OPEC partners, literally rescued this industry from total collapse," Barkindo told CNBC in Riyadh on Wednesday.
"Without this shale revolution we've seen in the U.S. the world would have been in major, major energy chaos," he said.
– CNBC's Holly Ellyatt and Reuters contributed to this report.