Oil prices rise on sharp drop in US crude inventories

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World oil prices rose on Wednesday as official data revealed a far sharper-than-expected drop in US crude inventories, caused in part by a drop in imports rather than a surge in energy demand, analysts said.

Brent North Sea oil for delivery in November jumped $1.56 to $112.10 a barrel in late London deals.

New York's main contract, light sweet crude for November, gain 62 cents to $87.54 a barrel.

After digesting the inventory data, traders were awaiting the outcome of a US Federal Reserve meeting widely expected to deliver some new stimulus for the sagging American economy.

The United States is the world's biggest oil consuming nation.

Ahead of the Fed outcome, the oil market pored over US Department of Energy data showing that US crude inventories dived 7.3 million barrels last week. Analysts polled by Dow Jones Newswires had forecast a drop of only 900,000 barrels.

Despite the slump, the oil demand outlook has darkened -- a day after the International Monetary Fund warned of an economic recovery that is much weaker than was predicted just months ago.

"As far as oil prices are concerned, the dismal IMF growth story points to lower oil prices," said analyst David Hufton at PVM Oil Associates in London.

"The potential (US) stimulus story, on the other hand, points to higher prices as it will bring in speculative buying long before there is a growth effect."

The meeting of the central bank's Federal Open Market Committee may move to further press down long-term interest rates, in hopes of prodding cash-rich banks to lend and companies to invest despite gloomy economic forecasts.

Weakness in the United States and Europe -- two of the world's major economic growth engines -- has weighed down on global financial markets in recent months.


© 2011 AFP

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