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NEW YORK: Oil prices closed higher on Wednesday, lifted by a Wall Street rally as the market shrugged off a larger-than-expected jump in US crude inventories that fuelled worries about weak demand.
New York's main contract, light sweet crude for September, settled at 70.16 dollars a barrel, up 71 cents from Tuesday's close.
In London, Brent North Sea crude for delivery in September rose 43 cents to close at 72.89 dollars a barrel.
"Oil underperformed from the general macroeconomic background and you can attribute that to the inventories," said independent trader Ellis Eckland.
The New York benchmark contract had climbed as high as 71.13 dollars, riding on the robust gains on Wall Street's major indices, but its rally ran into resistance after a bearish US government weekly report on oil stockpiles.
The US Department of Energy said crude inventories had jumped by 2.5 million barrels to 352 million barrels in the week ended August 7, more than triple the amount expected by analysts.
It was the third consecutive week of a build in crude stockpiles, pointing to weak demand in the world's largest energy-consuming nation.
US gasoline reserves fell by one million barrels, to 211.9 million barrels, slightly less than the 1.3 million barrels the market had expected.
The market closely monitors gasoline inventories during the US summer, when traffic normally rises as vacationers hit the highways.
Distillates inventories, including diesel and heating fuel, rose unexpectedly, by 800,000 barrels to 162.3 million. Analysts had forecast a decline of 300,000 barrels.
The oil market, however, found support from an upbeat tone on Wall Street, where stocks were up more than 1.0 percent in the second half of the session, and also from a weaker dollar.
The dollar's decline on Wednesday slowed after the Federal Reserve's policymakers announced the central bank would hold its near-zero interest rate unchanged.
At the conclusion of a two-day meeting, the Federal Open Market Committee said that "economic activity is levelling out" amid the deep recession, and announced it would extend its purchases of Treasury bonds by one month to October.
The International Energy Agency reported Wednesday that oil demand this year would be far weaker than last year, but revised upward its estimate for global demand growth for oil in 2009 by 190,000 barrels per day, and for next year by 70,000 barrels, citing expected rises in Asian demand.
The IEA also said that the US driving season, a big factor in demand for gasoline at this time of year, had "fizzled out," US industrial activity was still falling and global use of diesel fuel, which is used for trucks, transportation, and in generators, remained weak. - AFP/de
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