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Oil prices jump before US inventories

[LONDON] World oil prices rallied on Wednesday on expectations of another drop in US crude stocks in the latest energy inventories report, and ahead of a Federal Reserve interest rate decision.

US benchmark West Texas Intermediate for delivery in July leapt US$1.10 to US$61.07 a barrel compared with Tuesday's closing level.

Brent North Sea crude for August delivery added US$1.40 to US$65.10 a barrel in early afternoon deals in London.

The US government's Department of Energy will later release its petroleum report for the week to June 12.

The American Petroleum Institute (API), a private industry body, had Tuesday signalled a 2.9-million-barrel drop for last week - which was the seventh consecutive weekly decline.

Falling US stockpiles are seen as an indicator of healthy demand in the world's top crude consumer, and therefore this tends to boost the oil market.

"The DoE will be publishing the official inventory data this afternoon, which are expected to show the seventh consecutive weekly decrease in US crude oil stocks," said Commerzbank analyst Carsten Fritsch.

"If this turns out to be of a similarly high level to that reported by the API, it would lend support to oil prices." Traders have been hoping that a drawdown of the United States' burgeoning oil reserves during the summer, coupled with a slowdown in its shale output, could whittle down the global supply glut.

A surplus of US stocks was a key reason oil prices collapsed by more than 50 per cent between June 2014 and January.

Elsewhere, markets are hoping for some clues about the US central bank's timing for an interest rate rise following a broadly upbeat string of data on the world's top economy in recent weeks.

Dealers are "at the edge of their seat, waiting for both the (Federal Reserve) meeting and US crude inventories before making a move on prices", added Daniel Ang, investment analyst at Phillip Futures in Singapore.

AFP