Oil prices rise on US stock, increased world demand outlook

Oil futures extended gains in early Asian trade on Wednesday as US crude and gasoline inventories fell more than expected and the Energy Information Administration (EIA) raised its 2015 oil demand growth forecast.

Front-month Brent crude futures rose 23 cents to USD 65.11 a barrel by 0154 GMT. US crude climbed 54 cents to USD 60.68 a barrel.

The gains came after prices for crude oil, gasoline and diesel jumped more than 3 percent on Tuesday as bullish investors made bets across the oil complex for another weekly drop in US stockpiles.

"Crude oil prices rallied strongly overnight. US weekly crude oil inventories fell by a large 6.7 million barrels compared with expectations for a decline of less than 2 million barrels," ANZ bank said in a morning note on Wednesday.

"US weekly gasoline stocks also fell according to API, with gasoline stocks falling by 3.87 million barrels vs a Reuters poll of analysts expecting an increase of 280,000 barrels," it added.

The US government's Energy Information Administration (EIA) will issue official inventory data on Wednesday.

On the demand side, the EIA on Tuesday raised its 2015 world oil demand growth forecast by 20,000 barrels per day to 1.25 million bpd.

Despite the rallies this week, analysts said that big further gains were unlikely and that prices could start falling again as a global oversupply of crude remains in place.

"With US production still around record levels, the OPEC keeping its output quota unchanged at 30 mb/d and indications that OPEC members may even increase its production, the situation of oversupply will remain longer than expected.

This, combined with our forecast for a stronger US dollar, will keep downside risks alive," ABN Amro said in its June monthly commodity update.

Saudi Arabia, the world's top crude exporter, will supply full contracted volumes of crude oil to at least two Asian term buyers in July, unchanged from June, following OPEC's decision to maintain its production target, industry sources familiar with the matter said on Wednesday without giving more detail.

The OPEC kingpin has supplied full contractual volumes to most Asian buyers since late 2009, implying that the Saudis still want to defend market share via high volumes rather than prop up prices through supply cuts.