(Bloomberg) —Oil closed at the highest level in more than five months in New York amid signs that a global surplus is gradually diminishing.

Futures rose 3.3 percent. BP Plc Chief Executive Officer Bob Dudley, who in February joked that swimming pools might be needed to hold the global oil surplus, said Tuesday markets may re-balance by year-end. U.S. crude supplies probably expanded by 1.75 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

“Market sentiment continues to improve,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “A lot of people are convinced that the bottom has been reached, and the market will rebalance later this year.”

Crude has rebounded after slumping to the lowest since 2003 in February amid signs the global surplus will ease as U.S. output declines.  Exxon Mobil Corp. was demoted from the top credit rating by Standard & Poor’s for the first time since the Great Depression as the collapse in prices strangled cash flows. The rating was lowered from AAA to AA+, S&P said in a statement on Tuesday.

West Texas Intermediate for June delivery rose $1.40 to settle at $44.04 a barrel on the New York Mercantile Exchange. It was the highest close since Nov. 10. Total volume traded was 19 percent below the 100-day average at 2:45 p.m.

Dollar Weakens

Brent for June settlement increased $1.26, or 2.8 percent, to $45.74 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $1.70 premium to WTI.

“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year,” BP’s Dudley said in the company’s first-quarter earnings statement.

The dollar weakened as investors await policy decisions from the Federal Reserve and Bank of Japan. The Bloomberg Dollar Spot Index fell 0.4 percent, bolstering investor demand for commodities priced in the currency. The Standard & Poor’s 500 Oil & Gas Exploration and Production Index was up 3 percent to the highest since Dec. 1.

“I think this is mostly U.S. dollar driven,” said Clayton Rogers, an energy derivative broker at futures brokerage SCS Commodities Corp. “There isn’t much fundamental news to get excited about aside from BP’s leadership seeing tighter supply-demand heading into year end.”

Market Bottom

Oil markets are signaling that prices have bottomed, even as growth in demand is forecast to slow this year, according to Christopher Bake, a senior executive at Vitol Group, the world’s largest independent oil trader.

The projected gain in nationwide crude supplies will leave stockpiles above 540 million barrels for the first time since 1929. Gasoline inventories probably dropped 1 million barrels, according to the survey.

Gasoline futures led gains amid falling stockpiles and strong demand. U.S. gasoline consumption, averaged over four weeks, rose 3.9 percent from a year earlier to 9.39 million barrels a day through April 15, EIA data show.

“It’s clear that gasoline consumption is robust,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.6 billion. “We are seeing impressive demand, which is a function of more people working and low prices.”

Gasoline futures for May delivery rose 3.5 percent to $1.566 a gallon, the highest settlement since Aug. 31. May diesel climbed 3.3 percent to $1.3325, the highest settlement since Dec. 4.

Oil-market news:Russia expects no new initiatives to cap output before OPEC’s scheduled June meeting, Energy Minister Alexander Novak told reporters in Moscow. The government in eastern Libya exported its first cargo of crude Monday since the country with Africa’s biggest known oil reserves split into rival power centers in the east and west. Malta’s government refused entry to the tanker. Rig activity in Canada’s oil fields has reached a record low, according to historical data provided by the Canadian Association of Oilwell Drilling Contractors, which dates back to 1984. Kuwait plans to boost production to more than 3 million barrels a day by June, doubling supply from where it stood during last week’s oil-worker strike, according to Haitham Al-Ghais, market research manager at Kuwait Petroleum Cor