Oil up more than $1 to $65 a barrel on strong U.S. demand

By Simon Falush

LONDON (Reuters) - Oil climbed by more than a dollar to $65 a barrel on Wednesday as strong demand and falling stockpiles in the United States pushed prices higher.

Brent futures were up $1.25 at $64.95 a barrel by 1358 GMT, having touched a high of $65.47. Front month U.S. crude futures were up 98 cents at $60.95 per barrel.

Data from the U.S. Energy Information Administration, due at 1430 GMT, is forecast to show that U.S. crude stocks fell for a seventh consecutive week, according to a Reuters poll of analysts.

JP Morgan said in its weekly oil research note that U.S. production had reached a new high this week but would start to drop.

An expected fall in U.S. crude production because of the relatively high cost of producing shale has also supported prices.

Despite the demand strength in the United States and Asia, prices have mostly stayed below $65 a barrel this year, compared with Brent crude's $115 this time last year.

An excess supply of oil in the Atlantic basin has seen traders leave full tankers at sea.

"There are so many tankers floating for prompt delivery that people will want to see the fall in shale production, rather than predictions of a decline, before it will give much support," said Maarten van Mourik, an independent oil economist in Paris.

Yet some analysts expect prices to rise somewhat going into the second half of the year because of strong demand and an expected fall in stocks.

"Fundamentals are at an inflection point and will improve from here, with high refinery runs this summer and sequentially declining U.S. crude production. As crude stocks erode, prices will gradually strengthen," United States-based Pira Energy said.

Strong U.S. fuel demand, this week's tropical storm, Canadian wildfires that led to the closure of oil production and continuing stock withdrawals have resulted in U.S. prices outperforming Brent contracts, pulling down Brent's premium to around $3 a barrel.

(Additional reporting by Henning Gloystein in Singapore, Editing by William Hardy and David Goodman)