Oil jumps after surprise fall in US crude reserves
Oil prices spiked higher Wednesday as traders were shocked by tumbling US crude inventories which highlighted strong demand in the world's biggest energy consuming nation.
Brent North Sea crude for October delivery jumped 1.68 dollars to 74.04 dollars a barrel in late afternoon London trade.
New York's main futures contract, light sweet crude for delivery in September, rallied 2.70 dollars to 71.89 dollars. The September contract expires at the close on Wednesday.
The US government's Department of Energy (DoE) announced earlier that American inventories of crude fell a massive 8.4 million barrels last week, snapping a three-week run of successive gains.
That took traders completely by surprise, with the market having expected an increase of 1.5 million barrels.
DNB Nor oil analyst Torbjorn Kjus described the report as "bullish," meaning that it would spur oil prices to higher ground.
The DoE added that US gasoline (petrol) reserves sank 2.1 million barrels, much more than forecasts for an 800,000-barrel decline.
Distillates, which include diesel and heating fuel, fell 700,000 barrels last week whereas analysts had pencilled in a gain of 500,000 barrels.
"We'll take this as a one-off event until there is confirmation that this is more than a fluke report," said commodities analyst Mike Zarembski at OptionsXpress in Chicago.
In earlier trade on Wednesday, prices fell briefly below 69 dollars in New York as traders fretted over fresh losses on global stock markets.
Oil had risen on Tuesday in line with firmer stock markets and a weaker dollar, which can stimulate demand for dollar-priced crude from investors holding rival currencies.
Asian and European equities slid earlier on Wednesday as financial markets endured a roller-coaster week amid uncertainty surrounding the economic recovery, traders said.
Chinese share prices tumbled by 4.30 percent as resources companies plunged amid concerns over declining international commodity prices, dealers said.
Howerver, Europe's main stock markets finished narrowly mixed, recovering from early lows as as investors mulled the global economic outlook.
Also on Wednesday, Hurricane Bill strengthened to a powerful category four storm with wind speeds near 135 miles per hour (215 kilometres per hour) but risk of oil transport disruptions were thought to be low, analysts said.
"Market participants are also keeping an eye on Hurricane Bill, the first hurricane of the 2009 season, which has quickly grown into a Category 4 hurricane," said Sucden analyst Nimit Khamar.
"Hurricane Bill is headed for Bermuda and the eastern US coast, so is not threatening to the oil and gas installations in the Gulf of Mexico and would unlikely effect crude prices, especially given energy stocks are ample."
-- Dow Jones Newswires contributed to this report --