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Oil prices advance on signs of stronger US demand

Global oil prices rebounded on Wednesday (Aug 20) from multi-month lows after a surprisingly big drop in US oil inventories.

NEW YORK: Global oil prices rebounded on Wednesday (Aug 20) from multi-month lows after a surprisingly big drop in US oil inventories.

US benchmark West Texas Intermediate for September delivery jumped US$1.59 (S$1.99) to US$96.07 (S$120.24) a barrel on the New York Mercantile Exchange, recovering from a seven-month low hit Tuesday. European benchmark Brent oil for October delivery gained 72 cents to close at US$102.28 (S$128.02) a barrel in London, rallying from the 14-month low the day before.

"Crude stocks dropped a lot more than expected," said Bart Melek, head of commodity strategy at TD Securities. "The market is looking at maybe a demand which is a little bit higher."

Melek said the energy inventory data, coupled with commentary in Wednesday's US Federal Reserve meeting minutes on the jobs market, suggest "the US economy may be doing okay in terms of growth."

Data from the US Energy Information Administration said crude oil stockpiles fell 4.5 million barrels in the week ending August 15. That was far heavier than expectations for a drop of 900,000 barrels, according to analysts polled by Dow Jones Newswires.

The report also showed that stocks of distillates, which include heating oil and diesel, dropped one million barrels. Analysts had predicted a 700,000-barrel decline.

Gasoline reserves however climbed by 600,000 barrels. Analysts had projected a drop of 1.3 million. Traders are also continuing to track conflicts in crude producers Libya and Iraq, as well as in Ukraine, a key conduit for Russian gas exports to Europe, analysts said.