NEW YORK Oil prices surged to a seven-month high near $72 a barrel on Wednesday after a U.S. government report showed a slowdown in crude imports eating away at inventories in the world's top energy user.
U.S. crude for July delivery rose $1.32 to settle at $71.33 a barrel after hitting a peak of $71.79 earlier in the session -- the highest since October 22. London Brent rose $1.58 to $70.80 a barrel.
The gains came after the U.S. Energy Information Administration reported nationwide stockpiles fell by a larger-than-expected 4.4 million barrels last week as imports dropped by 676,000 barrels per day. <EIA/S>
"The number that kind of stands out right away is the drop in crude oil imports," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. "If imports are going to drop, we're going to see some of the stockpiles erased."
The report also showed a decline in gasoline inventories as refiners slowed production and demand notched higher.
U.S. oil imports have been running below normal in recent weeks, reducing swollen storage levels and reinforcing the perception that OPEC production cuts are starting to make their mark on consumer nation supplies.
The cartel agreed to cut some 4.2 million barrels per day of output since last autumn in an effort to counter slumping world oil prices and shrinking demand triggered by the economic recession.
"Markets are pricing in the fact that high levels of global inventories are going to fall pretty fast in the third and fourth quarter if OPEC can maintain their current output levels," said Andrey Kryuchenkov, energy analyst at VTB Capital in London.
Kuwait's oil minister said Wednesday the group -- responsible for more than a third of the world's crude output -- could raise production if prices rose toward $100.
Wednesday's gains were capped by a rebound in the dollar against the euro -- which tends to put downward pressure on dollar-denominated commodities -- and losses in equities markets.
Oil prices had risen in the previous session, lifted by a separate report from the EIA in which the top government energy forecaster revised its global oil demand outlook higher for the first time since September.
Oil has more than doubled from the low $30s level hit this winter as investors have started to price in expectations for an economic recovery which should boost consumption.