Oil edges higher as OPEC boost offsets dent from United States supply

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Oil slumped to a two-week low on Wednesday, after USA data showed a smaller-than-expected drop in overall crude stocks and a surprising build in gasoline inventories, which raised worries about excessively high global supply.

Brent crude settled down 3.6 percent, or $1.96 a barrel, to $52.93.U.S. crude stocks fell 1 million barrels in the latest week, the U.S. Energy Information Administration said, a smaller draw than expected.

Moreover, oil prices were under pressure as a stronger US dollar dented investor sentiment, which made the dollar-denominated oil less attractive for holders of other currencies. Gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.

USA crude production rose to 9.252 million barrels per day from 9.235 million barrels in the week prior, continuing a strong rebound, according to EIA. While fuel demand has been relatively strong, consumers weren't able to absorb the additional 355,000 barrels-a-day of imported fuel that came ashore last week, he said.

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"People dump gasoline in the US because it's one of the few places in the world where demand has been consistently good", he said.

OPEC will review policy for the second half of this year at a May 25 meeting.

At 532.3 million barrels, crude oil inventories, the EIA said, were near the upper limit of what is typical for the season, despite refineries returning to higher runs after maintenance season.

But the government data still took many market participants by surprise.

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Iran pumped just shy of its 3.8 million barrels a day allowed under the deal in the first quarter, according to the International Energy Agency.

"As we approach the Memorial Day weekend, gasoline numbers are going to have more and more importance", said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. Refinery utilization rates rose by 1.9 percentage points. As the forward curve switched to contango over the course of the following year, with active futures hitting a discount of $24.45 to futures contracts 12 months ahead in January 2009, crude oil prices fell 75.6%.

"There's a possibility this is not a one-off", he said. Diesel futures fell 0.69 cent, or 0.43%, to $1.6150 a gallon.

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