Oil up more than one percent after U.S. inventory drop

By Christopher Johnson

LONDON (Reuters) - Crude oil prices rose more than 1 percent on Friday after U.S. inventories fell for a fourth straight week, though a stronger dollar left prices set for a weekly drop.

Oil saw steep falls earlier this week as a resurgent dollar weighed on the market amid concerns U.S. crude supplies may have started rising again after three weeks of draws.

North Sea Brent crude has shed more than 3 percent this week, its second straight weekly loss, while U.S. crude is set to end a record weekly winning streak with a loss of more than 2 percent.

 

July Brent was up 30 cents at $62.88 a barrel by 1315 GMT. U.S. crude , also known as West Texas Intermediate (WTI), reached an intra-day high of $58.72 a barrel, up $1.04, before easing back to around $58.

U.S. inventory data and wildfires in Canada, which knocked out 10 percent of its oil sands output, also supported prices.

Data from the U.S. Energy Information Administration (EIA) on Thursday showed crude oil inventories > fell by 2.8 million barrels last week, down for the fourth week ahead of Monday's Memorial Day holiday, which unofficially kicked off the peak summer driving season in the United States.

The fall in U.S. crude stocks in the EIA data was more than the 857,000-barrel draw forecast in a Reuters survey and in contrast with a build of 1.3 million barrels estimated by the American Petroleum Institute. [API/S]

"The global supply imbalance is set to persist into the second half of 2015, but pressure to store in the U.S. is likely to taper off over the summer," Barclays analysts said in a note.

Oversupply in oil markets outside the United States gives little room for a rise in spot prices, analysts say.

The Organization of the Petroleum Exporting Countries (OPEC) meets next week to agree policy for the next six months and is widely expected to maintain a collective production target of 30 million barrels per day (bpd).

The cartel's output is more than 1 million bpd above this level and demand for its oil is much lower -- leaving a huge supply surplus, estimated by some analysts at more than 2 million bpd. [OPEC/O]

"That should keep a lid on prices," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

Analysts at French bank Societe Generale agreed, seeing "no chance" of a change in OPEC production policy next week.

(Additional reporting by Henning Gloystein; Editing by Dale Hudson and David Goodman)