Oil prices jumped 2 percent on Thursday, boosted by the ongoing rally in the U.S. stock market, although gains in crude futures were capped by heavy inventories in spite of efforts by producers to cut output, Reuter reported.
U.S. light crude futures CLc1 were up $1.03 to $53.78 a barrel, a gain of 2 percent, while Brent crude LCOc1 settled up $1.16, or 2.1 percent, to $56.24.
U.S. crude hit a peak of $54.06, highest in more than three weeks, after Wall Street's open as stocks added to the previous session's rally that had lifted the Dow Jones Industrial Average to close above 20,000 for the first time. Major averages were little changed in the afternoon.
Robert Yawger, director of energy futures at Mizuho Americas, said traders may keep adding long positions in oil that are already at two-and-a-half-year highs.
"The market is pushing for $55 oil here and ultimately it seems determined to get there," Yawger said. "The speculators have an interest in pushing this thing to the upside, which has much do with this (rally) as anything else."
Oil's gains were limited by Wednesday's U.S. inventory figures showing an increase of 2.8 million barrels last week in U.S. crude inventories to 488.3 million barrels.
Gasoline inventories rose sharply, putting current stocks at 253 million barrels, highest in this century for this time of year. That has caused refining margins to wither; the U.S. refined product crack spread CL321-1=R hit a low of $12.79 a barrel on Thursday, lowest since November, before recovering to $13.36.
U.S. crude oil production has risen 6.3 percent since the middle of last year to 8.96 million barrels per day (bpd).
Rising U.S. output and inventories should somewhat offset output cuts agreed to by the Organization of the Petroleum Exporting Countries and other producers, including Russia, hoping to reduce a global glut.
The crude benchmarks have stayed within narrow trading ranges since OPEC agreed to limit production, but that may not last if U.S. production keeps rising.
"We still believe there are more arguments in favor of prices breaking out of their current corridor and embarking on a downward trajectory," said Carsten Fritsch, senior commodities analyst at Commerzbank in Frankfurt.
Industry data suggests OPEC and other exporters have made progress toward their agreed output reduction of almost 1.8 million bpd during the first half of 2017.