American crude inventories slipped by 7.42 million barrels last week as refiners boosted operating rates to the highest level in more than a decade, signaling strong demand, the Energy Information Administration said on Thursday. The Brent-WTI spread widened to $5/Bbl at year-end 2017 - the largest difference since 2013.
Oil prices have received general support from production cuts led by OPEC and by Russian Federation, which started in January previous year and are set to last through 2018, as well as from strong economic growth and financial markets.
The gains indicate that the global glut that has dogged the market since 2014 is shrinking.
Prices have risen as the Organization of Petroleum Exporting Countries and Russian Federation work to reduce global inventories through output reductions and amid concerns over the stability of the group's third-biggest producer, Iran.
"That trend is likely to continue into 2018 and worldwide oil inventories will continue their decline", said Andrew Lipow, president of Lipow Oil Associates in Houston.
Crude oil prices ended 2017 at $60 a barrel, the highest end-of-year price since 2013, EIA said.
Brent crude futures were at $67.77 a barrel, 15 cents, or 0.2 per cent, above their last close.
US West Texas Intermediate (WTI) crude futures were at $61.62 a barrel at 3.44am GMT, 18c or 0.3% above their last settlement, and not far off the $62.21 May 2015 high reached last week. It traded as high as $68.27 earlier in the session.
USA output is up nearly 16 percent since mid-2016.
Despite relatively high USA crude oil production, curtailments in production by members of the Organization of the Petroleum Exporting Countries (OPEC) and robust global demand supported crude oil price increases in 2017, EIA said. Only top producers Russian Federation and Saudi Arabia produce more.
"The U.S. shale impact is now encroaching on uncharted territory", analysts at RBC Capital Markets wrote this month, saying it had "redrawn the global crude flow map".
U.S. crude oil inventories continued to fall in the week to December 29, with a new decline of 7.4mn barrels (mbs) to reach 424.5 mbs, which is very close to the five year average of 420 mbs.
That is down 20 percent from their historic peaks last March and close to the five-year average of 420 million barrels. "You're seeing a little bit more of a bullish push-up in the price of oil", Mark Watkins, a Park City, Utah-based regional investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets, said by telephone.