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(Bloomberg) — Oil advanced for the first time in four days amid speculation that U.S. crude stockpiles will decline further, easing a supply surplus.

Inventories probably shrank for a seventh week as refiners processed more crude to meet increased fuel consumption in the summer, according to a Bloomberg survey before a report Wednesday. A tropical storm in the Gulf of Mexico prompted the evacuation of some workers from oil and gas installations.

Oil has traded near $60 a barrel since May as investors weighed the continued expansion of U.S. output against shrinking stockpiles. U.S. production will peak at a 43-year high this year before trailing off in the second half. Global supply has exceeded consumption the past five quarters, the most enduring glut since the 1997 Asian economic crisis, data from the International Energy Agency show.

“You are going to see another draw in tomorrow’s report,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “But there is still a lot of oil out there.”
West Texas Intermediate for July delivery rose 45 cents, or 0.8 percent, to end at $59.97 a barrel on the New York Mercantile Exchange. Total volume was about 32 percent below the 100-day average for the time of day at 3:01 p.m.

U.S. Stockpiles

Brent for August settlement fell 25 cents to $63.70 a barrel on the London-based ICE Futures Europe exchange. The July contract expired Monday after falling $1.26 to $62.61. The European benchmark crude traded at a premium of $3.73 to WTI for August.

Crude inventories in the U.S., the world’s biggest oil consumer, probably decreased by 1.8 million barrels in the week ended June 12, according to the median estimate in a Bloomberg survey. Supplies slid to 470.6 million barrels through June 5, still more than 90 million barrels above the five-year average for this time of the year, the Energy Information Administration said.

“The market is expecting another drawdown in U.S. inventories,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Inventories will probably continue to drop in the next few weeks.”

Crude inventories fell 2.9 million barrels last week, the American Petroleum Institute said, according to a person familiar with the report. Stockpiles at Cushing, Oklahoma, the delivery point for WTI futures, gained 329,000 barrels, the API was said to report.
Tropical Storm Bill went ashore on the Texas mainland Tuesday near Seadrift, packing heavy rains that will drop as much as 10 inches along the coast.

Evacuate Staff

The storm, which prompted some energy companies to evacuate non-essential personnel from operations in the Gulf of Mexico, is forecast to cause flooding across much of eastern Texas and then through the central U.S. as it moves northward.

Royal Dutch Shell Plc removed non-essential workers from the Gulf of Mexico and doesn’t expect weather to affect operations, spokesman Ray Fisher said in an e-mail.

Brent fell as much as 0.7 percent earlier as the U.S. dollar strengthened against the euro on concern that time is running out for Greece to secure a bailout. A stronger dollar reduces oil’s investment appeal.

“The market is caught between the dollar liftoff and stronger demand from an improving U.S. economy,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $128 billion of assets. “Nothing is knocking us out of the narrow range.”
The global glut would become the longest continuous period of surplus since at least 1985 by the third quarter if OPEC were to keep pumping at current rates, according to Bloomberg calculations using data from the IEA, the energy adviser to developed economies.

The Organization of Petroleum Exporting Countries, whose 12 members supply about 40 percent of the world’s oil, maintained its output quota at a June 5 meeting as it sought to defend market share against higher-cost producers. The group pumped 31.3 million barrels a day in May, according to the IEA.
–With assistance from Mark Shenk in New York.

To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Stephen Cunningham