By Amanda Cooper
LONDON (Reuters) - Oil rose for a third day on Thursday to reach its highest so far this year as financial markets drew support from investor optimism that the United States and China could resolve their trade dispute.
The price of crude has gained about 20 percent this year, driven primarily by the prospect of a decline in oil supply from OPEC and other top exporters such as Russia.
"This rally that we're seeing over the last two to three days is completely justified when you put the predicted OPEC production cuts into your global oil supply and demand equation," Tamas Varga of PVM Oil Associates said.
Brent crude futures were up 24 cents at $63.85 a barrel by 1417 GMT, after hitting a 2019 high of $64.81, while U.S. crude futures slipped 7 cents to $53.83 a barrel, reversing an earlier gain.
The Organization of the Petroleum Exporting Countries and allies such as Russia, a group known as OPEC+, have agreed to cut crude output by a joint 1.2 million barrels per day. Top exporter Saudi Arabia said it would cut even more in March than called for under the deal.
"Thanks to healthy oil demand growth and lower OPEC+ production ... we see the market tightening further over the coming months," UBS analyst Giovanni Staunovo said.
"As such, we continue to expect Brent oil prices will move up to $70 to $80 a barrel over three to six months."
Adding to the positive backdrop was data showing a surprise increase in China's exports in January, as well as a sharp rise in imports of crude oil before the Lunar New Year holidays in early February.
This week's positive tone in oil futures has masked a dislocation in the physical markets. The steep rise in availability of U.S. shale oil is leading not only to a build in domestic inventories of crude, but also in refined products.
The U.S. Energy Information Administration said on Wednesday U.S. crude stocks rose to their highest since November 2017 as refiners cut runs to the lowest since October 2017 to combat tumbling margins, particularly for gasoline.
Prices for physical barrels of light, sweet crude that yield large quantities of gasoline have come under pressure. Heavier, sour grades that yield higher-value middle distillates such as diesel, like Russian Urals, have benefited from OPEC's output cuts and U.S. sanctions on competing grades such as Iran's.
Crude inventories rose for a fourth week in a row, by 3.6 million barrels.
(Additional reporting by Alex Lawler in London, Henning Gloystein in SINGAPORE and Colin Packham in SYDNEY; Editing by Dale Hudson and Edmund Blair)
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