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By Bloomberg

Oil held gains near $59 a barrel as investors weighed easing U.S. crude stockpiles against signs that producers will boost drilling.

July futures were little changed in New York after rising 1.7 percent on Wednesday, snapping a five-day decline. U.S. crude inventories shrank by 2.67 million barrels through May 15, the Energy Information Administration reported Wednesday. Prices may fall further as drillers become more efficient and the Organization of Petroleum Exporting Countries refrains from cutting output, according to Deutsche Bank AG.

Oil’s rebound from a six-year low has faltered near $60 a barrel amid speculation that rising prices will encourage U.S. production. Crude stockpiles near the highest level in 85 years will continue to weigh on the market, according to Goldman Sachs Group Inc., Deutsche Bank and Citigroup Inc.

“The increase in U.S. production has been the key issue and the record level of inventories has reflected that gain in supply,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “Drillers have focused on reducing costs, so while the market is talking about activity restarting at about $65 it could still have an impact on trading.”

West Texas Intermediate for July delivery was at $59.09 a barrel in electronic trading on the New York Mercantile Exchange, up 11 cents at 1:29 p.m. Singapore time. The contract gained 99 cents to $58.98 on Wednesday. The volume of all futures traded was about 50 percent below the 100-day average. Front-month prices are 11 percent higher this year.

U.S. Supplies

Brent for July settlement climbed 15 cents, or 0.2 percent, to $65.18 a barrel on the London-based ICE Futures Europe exchange. It gained $1.01 to $65.03 on Wednesday. The European benchmark crude traded at a premium of $6.06 to WTI.

Crude stockpiles in the U.S., the world’s biggest oil user, fell a third week to 482.2 million barrels, according to EIA data. Supplies remain near the highest level since 1930, based on monthly records dating back to 1920, and are 100 million barrels above the five-year average for this time of the year.

Output fell by 112,000 barrels a day to 9.262 million a day because of a drop in production from Alaska. Refinery utilization rose by 1.2 percentage points to 92.4 percent of capacity.

Brent is projected to average $62.50 a barrel for the rest of 2015, while WTI will average $57.50, Michael Lewis, Deutsche’s global head of commodities research, said at a briefing in Singapore on Wednesday. U.S. dollar strength will be the key driver of prices over the next 1 to 2 years, he said.

OPEC Output

The Bloomberg dollar index, which tracks the greenback versus 10 major peers, was down 0.1 percent on Thursday. The measure has jumped 16 percent over the past 12 months.

OPEC has only been pricing out marginal producers for the past six months and there is no reason for the 12-member group to stop that market strategy now, Harry Tchilinguirian, the global head of commodity markets strategy at BNP Paribas SA, said at a Platts forum in London on Wednesday.

The group pumped 31.3 million barrels a day in April, exceeding its collective output quota of 30 million barrels for a 11th month, according to data compiled by Bloomberg. OPEC, which supplies about 40 percent of the world’s crude, meets in Vienna on June 5 to discuss its production target.