Traders shrugged off a rise in OPEC's official production ceiling Friday and took bullish positions ahead of Monday's U.S. holiday, pushing the price of crude oil close to $ 57 a barrel.
Analysts said the expected OPEC increase Friday was symbolic and had little effect on markets. They also played down the significance of a decision Thursday by the Organization of Petroleum Exporting Countries to suspend talks on an additional ceiling hike.
Prices, they said, moved upward mostly because traders took long positions _ buying oil ahead of the July 4 holiday Monday. That was considered a normal development given the recent volatility in the market.
The August contract for light, sweet crude on the New York Mercantile Exchange gained 17 cents by midday in Europe to trade at $ 56.67 a barrel.
The contract had fallen by nearly $ 1 a barrel overnight, continuing a downward trend that saw prices fall nearly $ 4 in four days.
Heating oil moved up by more nearly half a cent to trade at $ 1.6405 a gallon, while unleaded gas rose by over a penny, fetching $ 1.5788 a gallon.
Brent crude gained 6 cents at $ 55.64 a barrel on London's International Petroleum Exchange.
The June 15 OPEC decision to raise its official production quota by 500,000 barrels to 28 million barrels came into effect on Friday. But the group, including Iraq, which is not bound by the quota system, already is pumping close to 30 million barrels a day _ or about 35 percent of global demand.
OPEC on Thursday decided to suspend talks on another hike following the recent tumble in prices, but analysts said that development had little impact on the market.
"The market was fairly cynical about that proposal," said Deborah White of SG Securities in Paris. She said that with overproduction a fact, "most of the market participants didn't think it would translate into a production increase."
Analysts attributed this week's cooling down of oil prices to profit-taking by hedge funds and a dampening of last week's bullish market sentiment by U.S. government data showing increased supplies of crude and other fuels.
Prices are expected to continue falling at least in the short term, analysts said.
"The inventory data from the United States dampened what was a fairly bullish market last week, and we haven't seen the last of this," said ANZ Bank energy analyst Daniel Hynes in Melbourne, Australia.
The U.S. Energy Department's statistical arm said Wednesday inventories of crude oil increased by 1.1 million barrels to 328.5 million barrels, 8 percent above year-ago levels.
Refinery utilization also increased to 96.3 percent of capacity, up from 94.8 percent the week before, and that appeared to give a lift to the fuel supply. Gasoline inventories grew by 300,000 barrels to 216.2 million barrels, or 4 percent above year-ago levels, the government said.
"The report that U.S. refiners had increased utilization and output at a time when demand is strongest took people by surprise," Hynes said. "It hasn't changed people's minds that refinery capacity is tight, but it has dampened sentiment."
Crude oil futures are more than 50 percent above year-ago levels, but would still have to top $ 90 to reach the inflation-adjusted high set in 1980.