Oil prices rose about 1 percent on Wednesday, boosted by signs of strong USA demand for distillate products and tightening global crude supply, but gains were capped by a rising U.S. dollar and ongoing concerns about a global economic slowdown, Trend reports citing Reuters.
In the previous week ending January 25, API reported a build of 2.098 million barrels.
The U.S. announced sanctions on Venezuela's state oil company last week, a move that could curb supplies but the development has yet to push prices up steeply. The West Texas Intermediate (WTI) for March delivery erased 0.90 USA dollar to settle at 53.66 dollars a barrel on the New York Mercantile Exchange.
The American Petroleum Institute reported late Tuesday that USA crude inventories rose by 2.5 million barrels last week at a time of weakening global demand, Morning Star reported.
This will impact crude exports from Venezuela, which has the world's largest reserves of crude oil.
Global benchmark Brent crude dropped almost 1% to $61.39 a barrel while WTI futures were down more than 1% at $53.12 a barrel.
Despite hitting a 2-month high last week, crude oil prices have been chopping inside a tight range for several days as investors try to determine the key catalyst in the market at this time.
United States government data on Wednesday showed that domestic crude inventories rose by less than expected last week even as refineries hiked output. Short-term, speculative buying interest is being driven by the US sanctions on Venezuela.
In an interview aired by private broadcaster Televen, Manuel Quevedo, also president of the oil company, commented on USA sanctions imposed last week on PDVSA and its US subsidiary Citgo.
The producers' alliance, known as OPEC+, began cutting production from last month to avert a new supply glut. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies. Brent was up more than one percent and trading at $64.40 a barrel as of 10:49am GMT.
Morse predicted that moving forward "We have plenty of potentially bullish moves in the market" following a period of soft demand before the seasonal fuel consumption rise begins around May, with Brent rising into the mid-$60 range and hitting $70 before year end - which the researcher believes will encourage USA producers to allocate more money to drilling.
With a nervous market, traders are focused on the US State of the Union address by President Donald Trump.
Senior US and Chinese officials are poised to start another round of trade talks next week.