UPDATE 10-Oil rises as U.S. inventories fall on strong demand


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    * U.S. crude stockpiles fall 4.1 mln bbls last week- EIA
    * Estimated U.S. gasoline demand hits record high 9.9 mln
bpd -EIA
    * Oil demand steady in 2019 but OPEC supply, trade risks
    * Trump, Iran spar over oil prices ahead of OPEC meeting

 (Adds settlement prices, Fed move)
    By Jessica Resnick-Ault
    NEW YORK, June 13 (Reuters) - Oil prices turned positive on
Wednesday after a bigger-than-expected decline in U.S. crude
inventories along with surprise drawdowns in gasoline and
distillates indicated strong demand in the world's top oil
    Earlier in the session, Brent and U.S. crude futures had
retreated on concerns about rising production in the United
States and expectations that OPEC and other producers could
relax voluntary output cuts when they meet on June 22-23 in
    Brent crude  LCOc1  settled up 86 cents, or 1.1 percent, at
$76.74 a barrel and U.S. crude  CLc1  closed 28 cents, 0.4
percent, higher at $66.64 a barrel.
    Late in the session, crude prices slipped slightly as    
the Federal Reserve raised interest rates, a move that was
widely expected but still marked a milestone in the U.S. central
bank's shift from policies used to battle the 2007-2009
financial crisis and recession. urn:newsml:reuters.com:*:nTLADHEE2K Higher interest
rates strengthen the dollar, increasing the cost of commodities
including oil for buyers using other currencies.
    U.S. crude inventories  USOILC=ECI  fell 4.1 million barrels
last week, the Energy Information Administration said, exceeding
analysts' expectations for a decrease of 2.7 million
barrels. EIA/S  Estimated U.S. gasoline demand hit a record high
of 9.9 million barrels per day (bpd) in the week, the data
    "The demand metrics here are amazing for crude oil and
gasoline," said John Kilduff, a partner at Again Capital in New
York. "Put the exports of crude on top of that, and it's just a
really bullish report."
    U.S. crude production rose to 10.9 million bpd last week,
according to the EIA, but Kilduff said the market appeared able
to absorb the increase. "It seems like we need almost every
barrel of that to keep up with this refining demand."
    With output in Russia rising back above 11 million bpd in
June and Saudi production climbing to more than 10 million bpd,
supplies from all three top producers are increasing.  
    The Organization of the Petroleum Exporting Countries and
some non-OPEC producers, including Russia, started pumping less
in 2017 to reduce a global crude glut. Prices have risen around
60 percent over the last year.
    "More oil from OPEC plus is the base case," said Bjarne
Schieldrop, analyst at Swedish bank SEB.
    "Saudi Arabia and Russia have already started to lift
production," he said. "Unofficial sources have said Russia will
propose to return production back to the October 2016 (level),
i.e. removing the cap altogether over a period of three months."
    U.S. President Donald Trump and Iran exchanged sharp words
over oil prices, with Trump blaming OPEC for high oil prices and
Tehran accusing him of stoking volatility after he withdrew last
month from a global nuclear arms deal with Iran.  urn:newsml:reuters.com:*:nL1N1TF0E9
    Longer term, the market could tighten as demand increases if
OPEC fails to cover supply shortfalls, the International Energy
Agency said.  IEA/M 
    The IEA said it expects global oil demand to grow 1.4
million bpd this year, and in 2019, and will top 100 million bpd
in the fourth quarter of 2018.  urn:newsml:reuters.com:*:nL8N1TF1MG
    "The market will be finely balanced next year, and
vulnerable to prices rising higher in the event of further
disruption," the IEA said in its monthly report.
    Fund manager Pierre Andurand at Andurand Capital was
    "Prices will be above $150 in less than two years," he

GRAPHIC: Russia vs Saudi vs U.S. oil production    https://reut.rs/2JAw1dG
 (Additional reporting by Henning Gloystein in Singapore and
Christopher Johnson in London;
Editing by David Gregorio and Marguerita Choy)
 ((Jessica.Resnick-Ault@thomsonreuters.com; 646-223-6052;))

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