U.S. crude oil stocks unexpectedly drop

Oil Prices Rise as Greenback Backs Off

API reports dip in US oil inventories

Oil prices reversed early losses on Thursday as a US government report showed an unexpected decline in USA crude stockpiles and dollar strength waned.

Refinery crude runs fell by 329,000 barrels per day, EIA data showed.

West Texas Intermediate (WTI) crude CLc1 futures rose $1.09, or about 1.8 percent, to settle at $62.77 a barrel. That compared to the 1.8 million-barrel rise in inventories forecast by experts. Brent crude futures were up 20 cents, at $65.45/Bbl at 2:29 p.m. ET, Kallanish Energy reports.

"We think that stocks could rebound in the coming weeks, which coupled with further growth in USA production should pull oil prices down", said Capital Economics analysts in a note.

Crude stocks at the Cushing, Oklahoma, delivery hub for US futures fell 2.7 million barrels last week, the ninth straight week of drawdowns, the EIA said.

In a market structure called backwardation, prompt crude prices are higher than forward prices, discouraging storage.

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Crude inventories fell by 1.6 million barrels in the week to February 16, compared with analysts' expectations for an increase of 1.8 million barrels.

"It makes more sense to liquidate your on-hand inventories", Lipow said.

The decrease in net imports caught the market offguard, said Brian Kessens, portfolio manager at energy investment manager Tortoise Capital in Leawood, Kansas. That helped pull down net imports to the lowest level on record of below 5 million bpd.

Energy stocks in Japan saw sharper gains, with oil producer Inpex trading higher by 2.55 percent and Cosmo Energy gaining 4.59 percent.

A softer greenback made the dollar-priced oil more attractive for holders of other currencies.

"Oil prices and the S&P have been highly correlated, of late, with economic strength translating into improved company performance and higher energy demand", John Kilduff, partner at investment manager Again Capital in NY, told CNBC.

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