* Unexpected large U.S. crude stocks draw lifts prices
* U.S. heating oil rallies, distillate demand jumps 16 pct
* China Oct crude imports fall below 4 million bpd
(Recasts, update prices and market activity, changes byline
and dateline, previously LONDON).
By Gene Ramos
NEW YORK, Nov 10 (Reuters) - Oil prices rallied to a fresh
two-year high above $88 a barrel on Wednesday, rising for the
seventh time in eight sessions as U.S. government data showed
an unexpected heavy drawdown in crude inventories last week.
The day's price surge broke oil's recent strong inverse
correlation with the dollar, which rose to a one-month high
against the euro.
The crude stocks decline, which confirmed Tuesday's report
from industry sources of across-the-board drawdowns,
accompanied sharp declines in fuel stocks that reflected a
spike in demand to the highest level in six weeks, U.S.
government data showed.
By 1:50 p.m. EST (1850 GMT), U.S. crude for December
delivery <CLc1> gained 98 cents to $87.70 a barrel, after
climbing to $88.06, its highest price since Oct. 9, 2008.
Prices bounced off a session low of $86.10, shaking off both
the stronger dollar and weak Chinese import data.
Gasoline and heating oil led gains in the complex after a
deeper-than-expected decline in inventories thanks to stronger
demand, even while refiners stepped up production.
ICE December Brent crude <LCOc1> rose 63 cents to $88.96.
"Today's EIA data was bullish across the board as crude,
gasoline and distillate stocks yielded decent draws,
significantly more than expectations. In addition, an uptick in
refinery utilization was not enough to offset strong demand for
gasoline and distillates," said Chris Jarvis, senior analyst,
Caprock Risk Management in New Hampshire.
"Overall the market will likely view this as bullish, which
underpins strong secular trends on the macro level coupled with
concerns over a weak dollar, reinforcing the bullish sentiment
for the energy complex."
Oil prices have rallied 8 percent over the past eight days,
breaking out of this year's $70 to $85 range, thanks to OPEC
signals that it may tolerate both a higher oil price and the
Federal Reserve's massive Treasury bond buying plan to speed
economic growth.
Wednesday's data showing an unexpected fall in U.S. jobless
claim benefits added some relief to the still-weak labor market
[]. Last week, a report showing that more jobs were
created in October than expected helped lift oil prices.
U.S. PETROLEUM STOCKPILES DOWN
Data from the U.S. Energy Information Administration showed
that domestic crude inventories fell 3.3 million barrels last
week, defying forecasts in a Reuters poll for a 1.4
million-barrel increase. []
Distillate stockpiles, which include heating oil and diesel
fuel, fell 5.0 million barrels, far more than the forecast for
a 1.9 million-barrel drawdown.
That pushed the price of U.S. December heating oil <HOZ0>
to a session high of $2.4535 a gallon, also the highest since
Oct. 9, 2008. Heating oil's crack spread, or premium over crude
oil after processing, hit $15.10 a barrel, the highest since
Oct. 1 and extending a rally to six days.
Gasoline supplies decreased 1.9 million barrels against the
forecast for an 800,000-barrel drop. U.S. December gasoline
<RBZ0> also surged, hitting a six-month session high of $2.2312
a gallon.
The product drawdowns reflected higher consumption with
distillate demand over the past four weeks jumping 16 percent
from the same period a year ago, while gasoline demand gained
1.8 percent.
Earlier on Wednesday oil prices came under pressure from
news that China's crude imports fell 30 percent in October to
16.39 million tonnes, the lowest in at least 18 months, from a
record in September.
Analysts warned against reading too much into a single set
of trade data from China, the world's second-largest oil user.
The average of Chinese crude imports for September and
October, at 19.84 million tonnes, was roughly in line with
averages seen for the first eight months of the year at 19.73
million, suggesting re-stocking took place in the month before
October's week-long National Day celebrations.
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Graphic of possible technical price support lines:
http://link.reuters.com/meg74q
Graphic of IEA's oil price assumptions:
http://r.reuters.com/hyn54q
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(Additional reporting by Robert Gibbons and Eileen Moustakis
in New York; Christopher Johnson and Ikuko Kurahone in London;
Alejandro Barbajosa in Singapore; editing by Jim Marshall)
