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By Bloomberg

Oil extended its advance to trade above $61 a barrel on signs the U.S. supply glut is easing.

Futures rose as much as 1.8 percent in New York after gaining 2.5 percent Tuesday. U.S. crude inventories fell by 2 million barrels through May 8 for a second weekly drop, the industry-funded American Petroleum Institute was said to have reported Tuesday. A decline of 250,000 barrels is projected in a Bloomberg survey before government data Wednesday. The drop in crude stocks has been offset by a rise in oil-product inventories, according to the Paris-based International Energy Agency.

“The API report yesterday gave U.S. oil prices a further lift and raised expectations” before Wednesday’s U.S. Department of Energy data, Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said by e-mail. “Seasonally we are into the time of year where crude inventories tend to fall as gasoline production ramps up.”

Oil is recovering from a six-year low in March as U.S. companies reduced the number of active rigs to the fewest since September 2010, bolstering speculation that output will slow. The IEA said U.S. shale oil producers seem to have “blinked” in their “supposed standoff” with the Organization of Petroleum Exporting Countries and the “relentless rise in U.S. supply seems to be finally abating.”

West Texas Intermediate for June delivery rose as much as $1.08 to $61.83 a barrel in electronic trading on the New York Mercantile Exchange, and was at $61.41 at 8:30 a.m. New York time. The contract gained $1.50 to $60.75 on Tuesday. The volume of all futures traded was about 15 percent below the 100-day average for the time of day. Prices have advanced 15 percent this year.

U.S. Supplies

Brent for June settlement, which expires Thursday, increased 54 cents, or 0.8 percent, to $67.40 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.97 to WTI. The more active July contract climbed 48 cents to $67.86.

Crude inventories in the U.S., the world’s biggest oil consumer, decreased to 487 million barrels through May 1, according to the Energy Information Administration. Supplies remain near the highest level since 1930, based on monthly records from the Energy Department’s statistical arm dating back to 1920.

Stockpiles at Cushing, Oklahoma, the delivery point for WTI contracts and the nation’s largest oil-storage hub, slid by 827,000 barrels last week, the API in Washington reported, according to ForexLive. Stockpiles at Cushing probably fell by 400,000 barrels last week, according to a Bloomberg storage model.

Refining Pace

While U.S. crude inventories have fallen as output “buckled,” supplies of refined fuels are building up, the IEA said.

“With refineries already producing at a strong pace there will be a switch in focus toward gasoline inventories over the coming weeks,” Hansen said. “Demand for gasoline has to be strong, otherwise we will just see one tank emptying while another fills up.”

The IEA raised its estimate for non-OPEC supply growth in 2015 by 200,000 barrels a day on “surprisingly strong” output in the first quarter from countries including Russia, China and Colombia. Non-OPEC producers, which account for about 60 percent of global supplies, will expand output this year by 830,000 barrels a day to 57.8 million a day.