UPDATE 9-Oil rises on lower U.S. stocks, firmer demand

* U.S. crude stockpiles drop, fuel inventories rise -EIA
* Fed policymakers vowed to act as appropriate, minutes show

By Devika Krishna Kumar
NEW YORK, May 20 (Reuters) - Oil prices rallied on Wednesday
after U.S. crude inventories fell in the most recent week, but
gains were capped by worries over the economic fallout from the
coronavirus pandemic and weak refining margins.
Oil futures have staged a recovery from recent weakness as
production has declined more swiftly than expected, reducing the
supply glut that caused storage to fill.
Brent crude LCoc1 settled up $1.10, or 3.2%, at $35.75 per
barrel while July U.S. crude futures CLc1 ended up $1.53, or
4.8%, at $33.49.
U.S. crude inventories fell by 5 million barrels last week,
Energy Information Administration data showed, while stocks at
the Cushing, Oklahoma, delivery hub dropped by 5.6 million
barrels. EIA/S
"What this report confirms is that your worst nightmare -
that we're going to run out of storage space - is probably not
going to happen," said Phil Flynn, senior analyst at Price
Futures Group.
"We need to see more signs that rebalancing is taking place,
primarily through more demand," said Gene McGillian, director of
market research at Tradition Energy.
Continental Resources CLR.N , one of the largest U.S. shale
oil producers, on Wednesday urged North Dakota energy regulators
to intervene in the oil market through steps including limiting
output. Production in North Dakota has already fallen more than half
a million barrels per day (bpd) and has, along with cuts in
Texas and elsewhere, helped support prices.
Fuel demand has grown as lockdown curbs have eased
worldwide, and shipping data shows the Organization of the
Petroleum Exporting Countries and allies are complying with
their pledge to cut 9.7 million barrels per day in supply.
U.S. gasoline and distillate inventories rose last week,
data showed, as demand slipped. Weak crude refining profits
could delay a recovery in demand. Lingering concerns about the economic fallout from the
coronavirus pandemic, especially in the United States, the
world's biggest oil consumer, limited gains. Federal Reserve policymakers repeated a vow to do what it
takes to shore up the U.S. economy, minutes from the U.S.
central bank's April 28-29 policy meeting released on Wednesday
showed. Unless there is a major event such as a new OPEC decision,
extended cuts or new lockdowns, prices are likely to stay around
current levels, said Paola Rodriguez Masiu, senior oil markets
analyst at Rystad Energy.