Oil holds gains near 3-year high as US stockpiles extend drop

Hong Kong - Oil held gains near the highest close in more than three years as US crude stockpiles shrank for a seventh week, the longest run of declines since August, offsetting a rebound in production.

Futures were little changed in New York, up 2.5% for the week. Crude inventories slid by 7.42 million barrels last week, also the biggest decline since August, according to government data on Thursday.

Supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate, fell to the lowest since February 2015, while nationwide output expanded to a near record.

Oil is extending gains after climbing more than 12% last year as the Organisation of Petroleum Exporting Countries and its allies cut output to trim a global glut. However, the recent surge in WTI may lead to expanded US output.

The drill rig count will  "substantially increase" with crude prices between $61 and $65 a barrel, according to 42 percent of industry executives that responded to a Dallas Federal Reserve survey last month.

"There’s been a one-way, very steep and uninterrupted rally off the last minor low in mid-December near $56, so it won’t be surprising to see a pause here," said Ric Spooner, a Sydney-based analyst at CMC Markets.

"Prices are getting into shale oil country and the market may wait for evidence as to whether producers are increasing output or not."

WTI for February delivery was at $61.95 a barrel on the New York Mercantile Exchange, down 6 cents, at 2pm in Hong Kong. Total volume traded was about 48% below the 100-day average.

Prices added 38 cents to $62.01 on Thursday, the highest close since December 2014.

Brent for March settlement lost 6 cents to $68.01 a barrel on the London-based ICE Futures Europe exchange after rising 0.3% on Thursday to the highest close since December 2014. Prices are up 1.7% this week.

The global benchmark crude traded at a premium of $6.13 to March WTI.

US crude stockpiles fell to 424.5 million barrels last week, the lowest since September 2015, according to the Energy Information Administration. Oil output rose to 9.78 million barrels a day, increasing for the 10th time in 11 weeks.

Oil-market news:

CME Group cut the margin requirement for the WTI front-month contract to $1 950 from $2 100, according to its website.