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By Bloomberg

Oil extended its biggest advance this month on signs the slowdown in U.S. drilling is reducing a crude supply glut in the world’s biggest consumer.

Futures climbed as much as 1.6 percent in New York after rising 3.4 percent on Tuesday. Crude inventories probably fell for a sixth week through June 5 as refiners prepared to meet increased fuel demand in the summer, according to a Bloomberg survey before government data on Wednesday. OPEC, which maintained its output quota at a Friday meeting, will continue to pump above its ceiling, according to UBS Group AG.

While oil has rebounded from a six-year low in March to near $60 a barrel, the recovery has prompted speculation it will accelerate U.S. drilling that’s at the slowest since August 2010. Output from prolific shale formations will decline through July to the lowest level since January, the Energy Information Administration reported Monday.

“The seasonal improvement in demand has seen a reduction in inventories,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “To see the market make significant upward gains from here, we will need to see production cuts.”

West Texas Intermediate for July delivery climbed as much as 93 cents to $61.07 a barrel in electronic trading on the New York Mercantile Exchange and was at $60.93 at 1:14 p.m. Singapore time. The contract rose $2 to $60.14 on Tuesday. The volume of all futures traded was about 8 percent above the 100- day average. Prices have increased 14 percent this year.

U.S. Production

Brent for July settlement gained as much as $1.16, or 1.8 percent, to $66.04 a barrel on the London-based ICE Futures Europe exchange. It advanced $2.19 to $64.88 on Tuesday. The European benchmark crude traded at a premium of $4.44 to WTI.

U.S. crude inventories probably dropped by 1.5 million barrels last week to 475.9 million, according to the Bloomberg survey. They are almost 100 million barrels above the five-year average for this time of the year, data from the EIA show. Supplies shrank by 6.7 million barrels through June 5, the industry-funded American Petroleum Institute reported Tuesday, according to a person familiar with the data.

Crude production from shale formations such as North Dakota’s Bakken and Texas’s Eagle Ford will shrink 1.3 percent to 5.58 million barrels a day this month, based on EIA estimates. It’ll drop further in July to 5.49 million, the lowest level since January, the agency said.

Output in the U.S. will peak at a 43-year high in 2015 as producers work through a backlog of uncompleted wells before trailing off in the second half of the year. Production will increase to 9.43 million barrels a day, the most since 1972, the EIA said Tuesday in its monthly Short-Term Energy Outlook. That’s 240,000 barrels higher than last month’s estimate.

OPEC Output

Refiners in the U.S. are delaying maintenance scheduled for 2015 until 2016 to take advantage of “incredible” margins and demand for refined products including gasoline, Robert Campbell, head of oil-products research at Energy Aspects Ltd., said in an interview at Bloomberg headquarters in New York.

The Organization of Petroleum Exporting Countries agreed at a June 5 meeting to keep its output target at 30 million barrels a day as it sought to defend market share against higher-cost producers. The 12-member group, which supplies about 40 percent of the world’s oil, has exceeded its collective quota for the past 12 months, according to data compiled by Bloomberg.

The return of Iranian crude to the market if sanctions are lifted could make the next OPEC meeting on Dec. 4 “more intense,” UBS analyst Giovanni Staunovo said in a research note. Iran can return output to pre-sanctions levels in a short time and wants the 12-member group to make room for increased supply, Oil Minister Bijan Namdar Zanganeh said last week.