* U.S. oil stocks rise less than expected -EIA
* Venezuela sanctions yet to spark rally but still supportive
* U.S. and China officials to hold trade talks next week (Updates with settlement prices, adds commentary)
By Stephanie Kelly
NEW YORK, Feb 6 (Reuters) - Oil prices rose about 1 percent on Wednesday, boosted by signs of strong U.S. demand for distillate products and tightening global crude supply, but gains were capped by a rising U.S. dollar and ongoing concerns about a global economic slowdown.
Brent crude LCOc1 futures gained 71 cents, or 1.15 percent, to settle at $62.69. The benchmark earlier fell to a session low of $61.05.
U.S. West Texas Intermediate (WTI) crude CLc1 futures gained 35 cents, or 0.65 percent, to settle at $54.01 a barrel, up from a session low of $52.86.
U.S. government data on Wednesday showed that domestic crude inventories rose less than expected last week even as refineries hiked output. Stocks USOILC=ECI increased 1.3 million barrels in the week ended Feb. 1, compared with analysts' expectations for an increase of 2.2 million barrels. stocks USOILG=ECI increased by 513,000 barrels, less than anticipated, while distillate stockpiles USOILD=ECI fell a greater-than-expected 2.3 million barrels.
"Distillate demand increased sharply last week due to the extreme cold weather, which contributed to the declining distillate stocks," Commerzbank (DE:CBKG) analyst Carsten Fritsch said. "All in all this report is bullish for crude oil and refined product prices."
Market participants have focused on signs of tightening global crude supply after the Organization of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output.
The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered almost three-quarters of its pledged cuts already, a Reuters survey showed last week. sanctions on Venezuela's state oil company could also lift prices, though they have yet to trigger any sharp increase. The sanctions aim to block U.S. refiners from paying into PDVSA accounts controlled by Venezuelan President Nicolas Maduro.
Venezuela's opposition is opening a U.S. fund to receive the proceeds of oil sales, a key measure to secure revenue for its effort to dislodge Maduro, an opposition lawmaker said on Wednesday. stronger U.S. dollar limited gains on Wednesday. A stronger dollar makes greenback-denominated commodities more expensive for holders of other currencies.
"Despite several forays in WTI above our prior resistance of $55, the market continues to draft back down largely under the pressure of this week's stronger dollar," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
Also dampening market sentiment were worries about weaker global economic growth and the U.S.-China trade dispute. Oil prices fell on Tuesday after a survey showed euro zone business expansion nearly stalled in January. President Donald Trump said in his State of the Union address that a trade deal was possible with China. U.S. and Chinese officials are poised to start another round of trade talks next week.