Oil prices rose about 1 per cent overnight, boosted by signs of strong US demand for distillate products and tightening global crude supply, but gains were capped by a rising US dollar and ongoing concerns about a global economic slowdown.

Brent crude futures gained 71 US cents, or 1.15 per cent, to settle at $US62.69.

The benchmark earlier fell to a session low of $US61.05.

US West Texas Intermediate (WTI) crude futures gained 35 US cents, or 0.65 per cent, to settle at $US54.01 a barrel, up from a session low of $US52.86.

US government data overnight showed that domestic crude inventories rose less than expected last week even as refineries hiked output.

Stocks increased 1.3 million barrels in the week that ended on February 1, compared with analysts’ expectations for an increase of 2.2 million barrels.

Petrol stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles fell a greater-than-expected 2.3 million barrels.

‘Distillate demand increased sharply last week due to the extreme cold weather, which contributed to the declining distillate stocks,’ Commerzbank analyst Carsten Fritsch said.

‘All in all this report is bullish for crude oil and refined product prices.’

Market participants have focused on signs of tightening global crude supply after the Organisation of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output.

The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered almost three-quarters of its pledged cuts already, a Reuters survey showed last week.

US sanctions on Venezuela’s state oil company could also lift prices, though they have yet to trigger any sharp increase.

The sanctions aim to block US refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro.

Venezuela’s opposition is opening a US fund to receive the proceeds of oil sales, a key measure to secure revenue for its effort to dislodge Maduro, an opposition lawmaker said on Wednesday.

A stronger US dollar limited gains on Wednesday.

A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.

‘Despite several forays in WTI above our prior resistance of $US55, the market continues to draft back down largely under the pressure of this week’s stronger (US) dollar,’ Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Also dampening market sentiment were worries about weaker global economic growth and the US-China trade dispute.

Oil prices fell on Tuesday after a survey showed euro zone business expansion nearly stalled in January.

US President Donald Trump said in his State of the Union address that a trade deal was possible with China.

Senior US and Chinese officials are poised to start another round of trade talks next week.