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Oil prices surge 7%, US crude rises above $41

Oil prices jumped 7 percent on Thursday after a rally in equity markets and an unexpected fall in US crude inventories.

World stock markets rose as Chinese shares recovered on hopes that government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased.

The US economy grew faster than initially thought in the second quarter on solid domestic demand, according to government data released Thursday. Gross domestic product expanded at a 3.7 percent annual pace instead of the 2.3 percent rate reported last month, the Commerce Department said in its second GDP estimate.

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Front-month Brent, the global oil benchmark, was up USD 2.90 at USD 46.04 a barrel by 11:48 a.m. EDT (1548 GMT). US crude was up USD 2.74 at USD 41.34 a barrel.

Phillip Futures oil analyst Daniel Ang in Singapore said he saw the current rally as a pause in a downward trend, rather than a longer term shift upwards.

“We would not underestimate the current bearish momentum and still believe that it is possible to see prices break supports of USD 38 and USD 45 for WTI and Brent,” Ang said.

Standard Chartered cut its 2015 Brent forecast by USD 10 a barrel to USD 54, and slashed its 2016 forecast by USD 20 to USD 63.

It sees macro factors such as a Chinese economic slowdown offsetting improved market fundamentals.

The bank expects US crude to average USD 48 in 2015 and USD 58 in 2016.

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Oil prices were supported by data on Wednesday showing US crude inventories fell 5.5 million barrels in the week to Aug. 21, the biggest one-week decline since early June.

Analysts had expected an increase of 1 million barrels.

But some analysts said the inventory fall may be connected to lower import figures for last week and may not mark the start of a trend.

Many are bracing for a rise in stocks over the coming months as refiners shut for seasonal work.

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“Without the sharp fall in imports, crude oil stocks would have been rather flat last week,” Commerzbank oil analyst Carsten Fritsch told the Reuters Global Oil Forum.

SEB commodities analyst Bjarne Schieldrop said the US stockpiles figures were not particularly bullish:

“The upturn is more due to broad-based sentiment rising,” Schieldrop said. “I still expect Brent will break below USD 40.”

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