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Oil extends pre-Christmas rally in Asia after US report

[SINGAPORE] Oil prices extended their recent rally in Asia on Thursday as a drop in US crude supplies cheered global financial markets ahead of the long Christmas weekend.

The main global contracts for the commodity surged more than 3.5 per cent on Wednesday after the US Department of Energy reported inventories unexpectedly fell in the week ending December 18 while imports sank about 13 per cent week on week.

The news stoked hopes that a plunge in prices, which has seen the Brent contract hit 11-year lows, may be coming to an end.

At 0330 GMT on Thursday US benchmark West Texas Intermediate climbed 25 cents, or 0.67 per cent, to US$37.75 a barrel and Brent gained 24 cents, or 0.64 per cent, to 37.60.

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WTI this week broke past Brent for the first time since January, after US lawmakers last week lifted a 40-year ban on crude exports, leading to hopes of a fall in supplies at home.

"Concerns over the global supply glut have been slightly eased by last week's decline in stockpiles," Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, told Bloomberg News.

"Seasonally stockpiles should be easing, but the issue here is how fast. At this price level, the number of rigs should continue to fall." However, analysts pointed out that the US report also included some aspects that were less favourable towards addressing a supply glut that has sent prices diving more than 60 per cent from above US$100 since summer 2014.

Domestic production of oil rose slightly and inventories at a closely watched trading hub in Cushing, Oklahoma, increased.