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Oil rises to near $98 in Europe as report shows US crude supply drop, demand seen improving
Oil rose moved closer to $98 a barrel Wednesday after a report showed U.S. crude supplies fell more than expected, a sign demand may be improving.
By early afternoon in Europe, benchmark crude for February delivery was up 34 cents to $97.58 a barrel in electronic trading on the New York Mercantile Exchange. The January contract, which expired Tuesday, rose $3.34, or 3.6 percent, to finish at $97.22.
In London, Brent crude was up 26 cents at $106.99 on the ICE Futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories fell 4.6 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 2.3 million barrels.
Inventories of gasoline slid 2.8 million barrels last week while distillates dropped 400,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data ' the market benchmark ' later Wednesday.
Evidence the U.S. economy is improving also helped extend Tuesday's gains in the oil price. U.S. retailers said that holiday sales jumped last week, while the government reported a surge in apartment construction and building permits in November.
Gains by the euro on the dollar also helped lift crude prices by making the commodity cheaper for investors trading in currencies other than the dollar.
On Wednesday, the euro was up to $1.3094 from $1.3071 late Tuesday.
Some analysts remain pessimistic about the global economy and expect a slowdown to undermine demand for commodities.
"We expect the problems in the eurozone to escalate and global growth to remain sluggish, maintaining the downward pressure on the prices of commodities," Capital Economics said in a report.
In other energy trading on the Nymex, natural gas fell 0.2 cent to $3.126 per 1,000 cubic feet. Heating oil added 2.22 cents to $2.8814 a gallon and gasoline futures were up 0.17 cent to $2.5857 a gallon.
Alex Kennedy in Singapore contributed to this report.