[The News] 20 Aug, 2009

Oil jumps after surprise fall in US crude reserves

NEW YORK: Oil prices spiked higher Wednesday on tumbling US crude inventories indicating strong demand in the world's biggest energy-consuming nation.

New York's main futures contract, light sweet crude for delivery in September, rallied 3.23 dollars to close at 72.42 dollars.

The contract has rebounded by 5.67 dollars over the last two days. In London, Brent North Sea crude for October delivery jumped 2.22 dollars to 74.59 dollars.

Dealers said fresh US oil inventory data lifted prices which had earlier fallen briefly below 69 dollars in New York as traders fretted over fresh losses on global stock markets.

The US Department of Energy (DoE) announced Wednesday that American inventories of crude fell a massive 8.4 million barrels last week, snapping a three-week run of gains.

That took traders completely by surprise, with the market having expected an increase of 1.5 million barrels.

It was 'a very, very large draw of crude oil and considerable draw of gasoline from inventories,' said Bart Melek of BMO Capital Markets.

'We are certainly seeing an improvement from total distillate demand side, signaling that the economy might be turning,' he said. 'I'm not sure people really expect that type of decline to continue but they certainly expect things to get better as time goes on.'

The DoE also said that gasoline reserves sank 2.1 million barrels, much more than forecasts of an 800,000-barrel decline.

Distillates, which include diesel and heating fuel, fell 700,000 barrels last week whereas analysts had penciled in a gain of 500,000 barrels

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