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Oil jumps as US crude supplies fall

OIL prices rose sharply yesterday, wiping out a week's worth of declines after the government said supplies of oil and petroleum products dropped much more than expected.

Benchmark crude for January delivery surged by US$1.97, or nearly 3 percent, to settle at US$72.66 a barrel on the New York Mercantile Exchange. In London, Brent crude for January delivery added US$1.50 to settle at US$73.55 a barrel on the ICE Futures exchange.

The Energy Information Administration said that crude supplies fell by 3.7 million barrels last week and distillate fuels including heating oil dropped by 2.9 million barrels. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected more moderate draws of 2 million barrels of crude and 750,000 barrels of distillates.

Refineries tend to try to get rid of as much crude as possible toward the end of the year to avoid paying higher taxes. But heating oil supplies also dropped as frigid temperatures blanketed the U.S. Midwest and Northeast.

"The cold weather has really been pushing prices right now," analyst Peter Beutel said.

In other Nymex trading in January contracts, heating oil climbed 6.25 cents to settle at US$1.9658 a gallon while gasoline gained 2.88 cents to settle at US$1.8739 a gallon. Natural gas lost 6.1 cents to settle at US$5.462 per 1,000 cubic feet.


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