Oil prices jump on falling US crude stockpiles

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Oil prices rallied on Wednesday, extending a recovery from heavy falls over eurozone debt tensions, as the market reacted to news of a drop in US crude inventories, traders said.

New York's main contract, West Texas Intermediate for delivery in August, climbed $1.10 to $98.53 a barrel.

Brent North Sea crude for August grew $1.39 to $119.14 in late London deals.

Oil prices had already rebounded on Tuesday, one day after sliding on growing market concerns about the eurozone debt crisis and a weak US jobs market.

The US Department of Energy on Wednesday said that crude inventories dropped by 3.1 million barrels last week, more than double the amount expected by analysts.

The data came as the IEA warned that the oil market still needed more supplies for the third quarter of the year, despite an official stock release and increased OPEC production.

"Major producers have recognised that demand for their oil is rising... as economic growth and short-term fuel substitution keep global and emerging market demand growth robust," the International Energy Agency said in a monthly report.

"We welcome rising OPEC volumes seen in June, but the market needs still more oil," the agency said.

The Organization of Petroleum Exporting Countries (OPEC) on Tuesday held broadly steady its forecast for oil demand this year and forecast steady demand growth next year, saying that the strength of economic recovery was unclear.

Demand for oil this year would be 88.18 million barrels per day, an increase of 1.36 mbd from the level in 2010, OPEC said in its monthly report.

OPEC members supply more than one third of global crude oil and hold more than three quarters of reserves.

The oil market was meanwhile awaiting a weekly snapshot of energy inventories in the United States, which is the world's biggest consumer of crude oil.

Ahead of the data, on Tuesday, the privately-run American Petroleum Institute said that crude inventories increased for the first time in six weeks, by 2.3 million barrels to 359.4 million.

© 2011 AFP

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