Oil prices rise on surprise slump in US crude stocks

World oil prices rallied on Wednesday following news of tumbling crude reserves in top consumer the United States.

The US benchmark, West Texas Intermediate for delivery in July, jumped $1.74 to a one-month high at $104.07 a barrel.

Brent North Sea crude for July gained 86 cents to $110.55 a barrel in London, touching a level last seen in early March.

That shocked traders expecting a weekly gain of 700,000 barrels, after having seen stockpiles steadily mount for months.

“WTI has rallied after a decrease in crude inventories suggested demand for US oil last week was higher than expected,” said Fawad Razaqzada at trading site Forex.com.

“This was the sharpest drawdown recorded since mid-January.”

The American Petroleum Institute said Wednesday that its own survey showed a sharper drawdown in US crude stocks of 10.3 million barrels last week.

Brent oil won further support from renewed violence in Libya, which has dented hopes that oil output would recover any time soon, Razaqzada added.

Meanwhile China and Russia on Wednesday reached a huge natural gas supply deal worth $400 billion, a deal that has been a decade in the making.

Under the 30-year contract between China’s CNPC and Russia’s Gazprom, Russia could eventually pipe 38 billion cubic meters a year to its southern neighbor, CNPC said.

But the amount is barely more than half the 70 billion cubic meters envisaged under a 2009 framework agreement between the two