* U.S. data shows surprise 5.4 million barrel stocks fall
* Analysts had forecast 700,000-barrel decline
* OPEC decides to keep output unchanged, as expected
* OPEC Secretary General says market oversupplied
(Updates prices. adds EIA data, comment)
By Chris Baldwin
LONDON, May 28 (Reuters) - Oil rallied above $64 on Thursday
on bullish U.S. inventory data and after OPEC ministers meeting
in Vienna decided, as widely anticipated, to leave the group's
crude output unchanged at 24.85 million barrels per day.
U.S. crude oil for July delivery <CLc1> was up $1.16 at
$64.61 a barrel by 1520 GMT after having briefly touched $64.99,
its highest level since mid-November.
London Brent crude <LCOc1> rose $1.33 to $63.83.
U.S. crude stocks fell more than expected last week as
refiners ramped up operations, while gasoline inventories
dropped for the fifth week, the Energy Information
Administration said in weekly data released Thursday.
Commercial crude inventories fell 5.4 million barrels in the
week ended May 22, the EIA said, dwarfing the 700,000-barrel
decline analysts had forecast in a Reuters poll. []
"What we are seeing here is the demand side start to
improve," said analyst Phil Flynn at Alaron Trading in Chicago.
"Gasoline demand over the Memorial Day weekend is a critical
point in judging the health of the U.S. economy. I don't think
the increased demand over the holiday was a fluke."
OPEC UNCHANGED
Oil has climbed back from a low of $32.40 last December to
its current level, and on Wednesday Saudi Arabia's Oil Minister
Ali al-Naimi told reporters in Vienna the world was ready to
cope with a barrel price range of $75-$80.
On Thursday Naimi said that OPEC had decided to keep its
output target unchanged.
"Stay the course, that's the decision," Naimi said at the
end on an almost two-hour meeting of the Organization of the
Petroleum Exporting Countries. []
Analysts said the decision to leave output unchanged was
expected and had been thoroughly priced in to the market
beforehand.
"This decision is going to be fairly market-neutral in the
short run -- it's what the market was expecting," said Andrey
Kryuchenkov, analyst at VTB Capital in London.
"In the long-run, if they can stick to 80-85 percent
compliance, it will be market supportive as inventories will
start to come down -- as long as demand doesn't deteriorate
further."
STILL OVERSUPPLIED
Analysts said oil's recent highs have followed resurgent
global equity markets in spite of weak underlying fundamentals
of excess supply and poor demand for refined petroleum products.
"In the near term, oil will likely retain its high level of
correlation in daily return with equities, but equally with
(foreign exchange) as long as oil is kept off the market in
storage," said BNP Paribas senior oil analyst Harry
Tchilinguirian.
"When that oil starts coming back, depressing the prompt, we
can expect that relation to loosen."
In Vienna, OPEC Secretary General Abdullah al-Badri said the
oil market was still oversupplied, with around 130 million
barrels of crude and refined products currently stowed in
floating storage.
Industry officials and analysts estimate a range of 100
million to 130 million barrels of crude oil stored at sea in 50
to 53 vessels, as sellers profit on oil for prompt delivery
being cheaper than for future delivery.
(Additional reporting by Tim Gardner in New York, editing by
Anthony Barker)
