By MOMING ZHOU

Oil speculators missed out as record demand from US refineries helped trim supplies from their highest level in more than eight decades and drive prices higher.

Hedge funds and other money managers reduced their net-long position in West Texas Intermediate crude by 7.1% in the seven days ended May 19, the most in two months, US Commodity Futures Trading Commission data show. Short positions anticipating lower prices expanded by 30%.

Crude snapped a five-day decline the following day after US production fell to a three-month low and inventories slipped to the least since March. Demand from refineries is the strongest for this time of year on record as they prepare for the nation’s peak driving season.

“There are increasing signs that US production has topped out,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Refiners are using a lot of oil.”

WTI futures fell $3.49 to $57.26/bbl on the New York Mercantile Exchange in the period covered by the CFTC report as the dollar strengthened. The contract added 2 cents to $59.74 in electronic trading at 1:19 p.m. Singapore time Monday. Prices have risen 37% from the six-year low reached March 17.

US crude-oil production dropped 1.2% in the week ended May 15 to 9.26 million bpd, the lowest level since Feb. 6, according to the Energy Information Administration.

The agency reduced its 2015 forecast for US oil production on May 12 as the rig count fell. Output was predicted to average 9.19 million bpd this year, 40,000 bbl less than the previous month’s estimate.

Crude stockpiles fell by 2.67 million bbl in the seven days ended May 15. Supplies have declined since reaching 490.9 million bbl on April 24, the highest level since 1930. Inventories at Cushing, Oklahoma, the delivery point for WTI futures, decreased for a fourth week to 60.4 million.

US refineries used 16.5 million bpd of crude and other liquids in the week ended May 15, the most for the time of year in EIA data going back to 1989.

The number of oil drilling rigs decreased to 659 last week, the lowest level since August 2010, according to Baker Hughes. Drillers have idled more than half of the rigs they had active in October.

“With a falling rig count, it’s inevitable that at some point production will decline,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “The supply glut is easing.”

The net-long position in WTI futures fell by 18,522 to 244,053 futures and options in the week ended May 19, the lowest level since April 14. Short bets increased 16,120 while long holdings slipped 2,402.

Bearish wagers on US ultra low sulfur diesel fell 42% to 4,673. Bullish bets on gasoline slipped 0.7% to 23,796.

The average US retail price of regular gasoline gained 0.4 cent to $2.735/gal on May 21, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

US travel over the May 25 Memorial Day weekend is poised to reach a 10-year high as Americans are lured onto the roads by lower prices at the pump, according to AAA.

About 37.2 million Americans will travel more than 49 miles (79 kilometers) over the holiday weekend, a 4.7% increase from last year and the second-highest level for the holiday in AAA data.

“You will see higher demand for gasoline as we enter into the driving season,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “Inventories will be going down for the next several months.”