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US oil hits 2016 peak on surprise rise in inventories

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Oil prices rallied Wednesday, with US crude finishing at a new 2016 high after official data showed a surprise drop in the country's commercial crude inventories.

[NEW YORK] Oil prices rallied Wednesday, with US crude finishing at a new 2016 high after official data showed a surprise drop in the country's commercial crude inventories.

The Department of Energy said that crude stocks slid by 3.4 million barrels last week. Analysts' consensus had been for a rise of 750,000 barrels.

And supplies of gasoline and distillates such as diesel and heating fuel fell more than expected, according to the department data.

Matt Smith of ClipperData pointed out that oil prices had already been climbing on supply disruptions due to wildfires in Canada's oil-rich Alberta region and problems with rebels and leaks in a Shell pipeline in Nigeria, Africa's biggest oil producer.

The inventories fall just added to the push higher.

"So we've rallied higher on that. It was very surprising," Mr Smith said.

US benchmark West Texas Intermediate for delivery in June jumped US$1.57 to US$46.23 a barrel, its highest settlement since last November.

In London, Brent North Sea crude for July, the European benchmark, closed at US$47.60 a barrel, leaping US$2.08 from Tuesday.

The Department of Energy also said that US oil production fell by 23,000 barrels per day to 8.80 million barrels per day last week, down from 9.6 million barrels last June. US producers, especially those in shale oil areas, have been retrenching due to the low prices.

Market attention also focused on the closure of a key Shell pipeline in Nigeria following a leak.

"Petroleum prices are drawing some support from the latest pipeline closure in Nigeria, which has underscored a recent drop in output on an increase in militant attacks in the Niger Delta," said Tim Evans of Citi Futures.

Evans noted that total Opec production increased in April despite the drop in Nigerian output.

"And so while the market may be in the mood to focus on production losses, overall supply may be another story," he said.

AFP