NEW YORK - Oil prices rose about 1 percent on Wednesday, boosted by signs of strong U.S. demand for distillate products and tightening global crude supply, but gains were capped by a rising U.S. dollar and ongoing concerns about a global economic slowdown.
Brent crude futures rose 62 cents, or 1 percent, to $62.60 a barrel by 11:33 a.m. EST (1633 GMT). The benchmark earlier fell to a session low of $61.05 a barrel.
U.S. West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.8 percent, to $54.09 a barrel after posting a session low of $52.86 a barrel.
U.S. government data on Wednesday showed that domestic crude inventories rose by less than expected last week even as refineries hiked output. Stocks gained by 1.3 million barrels in the week ended Feb. 1, compared with analysts' expectations for an increase of 2.2 million barrels.
Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles posted a larger-than-expected drop by 2.3 million barrels.
"Basically it's a pretty supportive report," said Phil Flynn, oil analyst at Price Futures Group in Chicago. "That drop in distillates is probably enough to give the entire report a more bullish tilt.
Market participants have already been focused on signs of tightening global crude supply after the Organization of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output.
The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered almost three quarters of its pledged cuts already, a Reuters survey showed last week.
U.S. sanctions on Venezuela's state oil company could also lift prices, though they have yet to trigger any sharp increase. The sanctions aim to block U.S. refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro.
Venezuela, like fellow OPEC members Iran and Libya, was exempt from production curbs under the OPEC+ deal on expectations that its output faced involuntary downward pressure in 2019.
However, a stronger U.S. dollar limited gains on Wednesday. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.
"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Also dampening market sentiment still were worries about weaker global economic growth and the U.S.-China trade dispute. Oil prices fell on Tuesday after a survey showed euro zone business expansion nearly stalled in January.
U.S. President Donald Trump said in his State of the Union address that a trade deal was possible with China.
Senior U.S. and Chinese officials are poised to start another round of trade talks next week.