Oil prices rise after sharp drop in US supplies

NEW YORK (AFP) - Global oil prices rose on Wednesday following a much bigger-than-expected drop in US crude stockpiles.

US benchmark West Texas Intermediate for delivery in February jumped US$1.58 (S$2.01) to close at US$94.17 a barrel in New York.

European benchmark Brent crude for February gained 74 cents, settling at US$107.13 a barrel in London trade.

The US Department of Energy said commercial crude inventories fell by 7.7 million barrels in the week ending January 10. That compared with the average estimate of a decline of 800,000, according to a poll of analysts by Dow Jones Newswires.

The unexpectedly steep drop in US oil inventories "should keep a floor under prices in the short term and has helped pull prices sharply higher," said Mr Michael Hewson, chief analyst at traders CMC Markets.

The inventory report also showed a surprising decline in distillate stocks, while gasoline supplies rose more than estimated.

The rise in oil prices also came after the World Bank upgraded its 2014 forecast for global economic growth, suggesting potential improvement in oil demand.

The World Bank said that both high-income and developing countries appeared to be "finally turning the corner five years after the global financial crisis." Global growth was estimated to hit 3.2 per cent this year, accelerating from a 2.4 per cent annual pace in 2013.

Join ST's Telegram channel and get the latest breaking news delivered to you.