Brent crude oil futures extended gains on Wednesday to above $116 a barrel, the highest in more than 3 months, as a sharp drawdown in U.S. crude stockpiles combined with expected lower North Sea oil output to paint a tighter supply picture on both sides of the Atlantic.
Fears of supply disruptions as Middle East tensions festered, as well as hopes for further stimulus from major central banks to support the weakening global economy, added lift to oil futures.
U.S. crude oil inventories dropped 3.7 million barrels last week, the third straight week of drawdowns, data from the U.S. Energy Information Administration showed. The drawdown was far bigger than the forecast for a 1.7 million barrel decline in a Reuters poll of analysts.
A steep drop in U.S. gasoline stocks due to a series of refinery outages lifted gasoline futures to their highest intraday level since May, gaining nearly 3 percent to lead the petroleum complex.
While the crude stock draw was larger than expected, "more importantly we see the large dip in gasoline stocks ready to push us higher into the second half of summer," said Carl Larry, president of Oil Outlooks in New York.
In London, September Brent crude was up $2.55, or 2.24 percent, at $116.58 barrel by 2 p.m. EDT (1800 GMT). It reached a session high of $116.72, the loftiest for front-month Brent since May 3.
U.S. September crude oil was up $1.08, or 1.2 percent, at $94.51, having hit a session peak of $94.90 which marked the highest since May 15. U.S. gasoline stocks fell 2.4 million barrels last week, greater than the 1.5-million-barrel drop predicted. The four-week average demand for refined products in the United States rose to 19.3 million barrels per day, the highest since early September 2011, the EIA data showed.
U.S. September gasoline rose to a session high $3.0890 a gallon, the highest intraday price since May 3.
Brent crude oil's premium to U.S. crude climbed to $22.07, heading for its highest close since October, squeezed by maintenance in North Sea production on which the benchmark's price is calculated.
The pace of trading picked up, raising Brent's total trading volume to more than 8 percent above its 30-day average and U.S. crude dealings rose 11 percent above its 30-day average, Reuters data showed.
Overbought signals persisted for Brent, with the 14-day Relative Strength Index (RSI) rising to above 76, according to Reuters data. U.S. crude's RSI was near 64, up for a third straight day.
European Central Bank President Mario Draghi has said that the ECB will flesh out plans to bright some stability back to the straigned euro zone bond markets early next month, driving hopes the bloc could start to right itself again in the second half of the year.
China was also expected to address weakening growth levels, with expectations that it would launch more infrastructue projects, a move that is expected to raise demand for metals and energy.
In the U.S., consumer prices were flat in July for a second straight month and the year-over-year increase was the smallest in more than 1-1/2 years, giving the Federal Reserve room to ease policy further to tackle high unemployment.
(Additional reporting by Robert Gibbons in New York, Manash Goswami and Elizabeth Law in Singapore; Editing by Marguerita Choy)