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Oil extends gains after US fuel stocks drop

[LONDON] Brent crude oil rose above US$67 a barrel towards five-month highs on Wednesday after US crude stockpiles fell for a second straight week, suggesting the world's biggest oil market is rebalancing.

US crude oil stocks fell by 2.2 million barrels to 484.84 million barrels last week, the Energy Information Administration (EIA) said. Stocks at the key delivery hub of Cushing, Oklahoma fell by 990,000 barrels to 60.68 million barrels. "The report is clear cut in its bullish message to the market," said John Kilduff, partner at Again Capital LLC.

Brent for June was up 41 cents at US$67.27 a barrel by 1448 GMT. Brent hit a high of US$69.63 on May 6, its strongest since December.

US crude was up 17 cents at US$60.92 a barrel after reaching an earlier high of US$61.83.

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Prices also gained some lift after the dollar index plunged to a three-month low, following weak retail sales data for April.

Dollar-traded commodities such as oil benefit from a weaker US unit as it makes them cheaper for holders of other currencies. "Any recent dollar weakness is very supportive for the market," said Myrto Sokou, senior analyst at Sucden Financial.

Oil shrugged off a bearish report from the International Energy Agency (IEA), which said global supplies had increased, outpacing small rises in oil demand.

Many analysts, including the IEA, say global oil supply is rising as members of the Organization of the Petroleum Exporting Countries (Opec) pump record levels in a battle for market share. "Despite tentatively bullish signals in the United States, and barring any unforeseen disruption elsewhere, the market's short-term fundamentals still look relatively loose," said the IEA, which coordinates energy policies of industrial nations.