Crude-oil futures extended gains in Asian trade on Wednesday ahead of initial weekly oil inventory data from the U.S. and as the southern leg of the Keystone pipeline goes into operation.
On the New York Mercantile Exchange light, sweet crude futures for delivery in March were $95.37 a barrel at 0617 GMT--up $0.40 in the Globex electronic session. March Brent crude on London's ICE Futures exchange rose $0.34 to $107.07 a barrel.
Oil ended higher in overnight floor trade on positive sentiment after the International Energy Agency raised its estimate for world-wide daily demand in 2014 to rise 1.3 million barrels a day to 92.5 million barrels a day.
Rising U.S. oil production may hit a wall in coming years if it maintains a ban on exports, the Paris-based energy watchdog said.
The southern leg of TransCanada Corp.'s TRP.T +0.14% (TRP.T) Keystone XL pipeline in the U.S. is expected to go into operation on Wednesday. With a capacity of 700,000 barrels a day it will connect the oil pricing and storage hub at Cushing, Okla. with Gulf Coast refineries helping to reduce stocks and boost WTI crude prices.
"The market has taken the approach of this date with considerable calm which suggests either that traders have come to recognize that these kinds of events don't actually increase the overall consumption of crude or that the market is about to react more dynamically as it did in the past with comparable Seaway pipeline developments," Citi Futures energy markets strategist Tim Evans said.
The oil inventory report for the week ended Jan. 17 from the American Petroleum Institute trade body is due later on Wednesday. The more closely watched survey data from the U.S. Energy Information Administration is expected on Thursday.
Citi Futures expects a further decline of 1 million barrels to 2 million barrels in crude stocks.
Stronger fundamentals are supporting WTI crude which is benefiting from a seven-week downtrend in U.S. inventories, the imminent operation of the TransCanada pipeline and the IEA's bullish demand projections, Mr. Evans said.
Brent crude is trading at a premium of around $11.59 a barrel to Nymex WTI.
Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--rose 155 points to $2.6361 a gallon while February heating oil traded at $3.0369--222 points higher.
ICE gasoil for February changed hands at $915.75 a metric ton--down $3.25 from Tuesday's settlement.
