NEW YORK (Reuters) - Oil prices hit their highest for the year on Tuesday, aided by a disruption in Libyan crude exports, higher selling prices for Saudi oil and a weaker US dollar that tends to inflate commodity prices.
Since April's price rally of between 20 per cent and 25 per cent, oil bulls have been pushing the market up on the notion that a supply glut was easing from tightening world production despite continuous builds in U.S. crude stockpiles.
U.S. crude settled up US$1.47 at US$60.40 a barrel, after hitting a 2015 high of US$61.10.
Brent, a more widely used oil benchmark, settled up US$1.07 to US$67.52, after scaling the year's peak at US$68.40.
A report from industry group American Petroleum Institute suggested that U.S. crude inventories fell by 1.5 million barrels last week, for the first time this year.
A Reuters poll, meanwhile, indicated that U.S. inventories rose by 1.5 million barrels instead last week.
The U.S. Energy Information Administration will issue official stockpiles data on Wednesday.
Still, some were not convinced the recent price gains would have much staying power.
"I think the market is getting ahead of itself," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. "There's plenty of producer hedging going on as well, and those production levels are not going to come down if demand projections are not met. This could simply mean we are setting ourselves up for another leg lower in prices," Chirichella said.
Crude prices have risen 50 per cent in just over three months, after the June-to-January selloff hammered the market down to around US$40 a barrel from last summer's highs above US$100.
Protests stopped crude flows to the eastern Libyan port of Zueitina on Tuesday. Libyan output is below 500,000 barrels per day (bpd), a third of what the country pumped before 2010.
The US dollar fell on a mixed batch of U.S. economic data, boosting commodities denominated in the currency.
Saudi Arabia raised official selling prices for its Arab Light grade crude to Northwest Europe to reflect a price rally in rival grades in recent weeks.
Some argue the market remains oversupplied, with the Organization of the Petroleum Exporting Countries pumping almost 2 million bpd above demand.
OPEC meets next month to discuss production policy. Analysts see little chance it will restrain output as members battle for market share.