* U.S. crude stocks fell 10.3 million barrels last week,
* Libyan oil fields still shut; new fighting breaks out
* Coming up: U.S. EIA oil inventory data due
By Jacob Gronholt-Pedersen
SINGAPORE, May 21 Brent futures edged higher
towards $110 per barrel on Wednesday, supported by violence in
OPEC oil producer Libya and industry data showing an unexpected
draw in U.S. crude inventories.
U.S. crude stocks fell last week as refineries boosted
output, while gasoline inventories increased and distillate
stocks built, data from industry group the American Petroleum
Institute showed. Investors will now be watching closely to see
if official data from the U.S. Department of Energy's Energy
Information Administration (EIA) confirms the big drop.
"We are ramping up for the summer driving season, so a draw
in crude stocks shouldn't come as a surprise," said Tony Nunan,
oil risk manager at Mitsubishi Corp in Tokyo.
"We went from a strong winter more or less right into the
summer driving season, so I think this will continue to support
crude oil," he said.
Brent crude gained 20 cents to $109.89 a barrel at
0414 GMT, after it settled 32 cents higher.
U.S. crude for July delivery rose 63 cents at $102.96
a barrel, after it settled 22 cents up in the previous session.
U.S. crude for June delivery, which expired Tuesday,
settled 17 cents lower at $102.44, after hitting its highest
price in nearly a month on Monday.
The fragile situation in Libya continued to provide support
for global oil prices, with new fighting breaking out in the
capitol Tripoli early on Wednesday, according to witnesses, two
days after gunmen stormed parliament in the worst violence in
Libyan authorities have proposed a June national election as
the government seeks to resolve a standoff involving powerful
brigades of former rebel fighters who defy state authority.
Production at the country's western El Feel and El Shahara
oilfields is still shut more than a week since the government
said protests there were over. National output was around
210,000 barrels per day (bpd)
SOARING U.S. PRODUCTION
Crude inventories in the United States fell by 10.3 million
barrels in the week ended May 16, with stocks at the Cushing,
Oklahoma, delivery hub falling by 261,000 barrels according to
the API data. In comparison, a Reuters poll of analysts had
shown expectations that stockpiles likely rose by 800,000
barrels to their highest in more than 20 years.
"With U.S. shale (production) growing at a million barrels
per year, that has been keeping a lid on a market full of
geopolitical uncertainty and the main reason oil prices haven't
gone up more," said Nunan.
U.S. commercial gasoline stocks were also seen rising in the
week to May 16, while distillate inventories declined, the
Reuters poll of nine analysts showed.
The more closely watched EIA data will come out on Wednesday
at 1430 GMT.
The conflict in Ukraine also continued to support oil
prices, after a senior Russian official said the upcoming
presidential election in Ukraine on May 25 could deepen
political divisions, casting doubts on whether Moscow will
consider the election legitimate.
The West has imposed sanctions against Russia, the world's
biggest oil producer, over its involvement in the conflict in
Ukraine. A dispute between Moscow and Kiev over gas prices could
impact shipments of Russian natural gas to Europe.
(Editing by Tom Hogue)