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Oil prices jump 6 percent on U.S. stockpile draws, Keystone

A female employee fills the tank of a car at a petrol station in Cairo, Egypt, February 24, 2016. REUTERS/Mohamed Abd El Ghany

By Barani Krishnan

NEW YORK (Reuters) - Oil prices jumped 6 percent on Friday, heading for the largest weekly gain in a month, as drawdowns in U.S. crude stockpiles fed hopes that a punishing global oversupply that has lasted nearly two years may be nearing tipping point.

U.S. gasoline and diesel prices rallied along with crude, rising more than 5 percent each. Gasoline has been one of the strongest pillars of support for U.S. crude this year. Ultra low sulfur diesel, also known as heating oil, has rebounded this week on seasonally cold weather forecasts through late April.

Brent crude futures were up $2.45, or 6.2 percent, at $41.88 by 11:20 a.m. EDT.

U.S. crude futures gained $2.53, or 6.8 percent, to $39.79 a barrel.

For the week, both benchmarks were on track to rise about 8 percent, their most since the week ended March 4.

"We are starting to draw crude inventories in the U.S." said Scott Shelton, energy broker with ICAP in Durham, North Carolina. "Run rates are rising and U.S. production is falling. 

"This is very different I think than what was expected. The market perceives that these draws may continue as the Keystone outage will increase the likelihood," Shelton.

U.S. crude stockpiles fell by nearly 5 million barrels last week versus analysts forecasts for a build of 3.2 million barrels, government data showed.

The shutdown of the Keystone crude pipeline that delivers oil to Cushing also contributed to a drop of more than 480,000 barrels at the Oklahoma delivery point for U.S. crude futures in the five days to Tuesday, data from market intelligence firm Genscape showed.

Some traders also cited optimism over an upcoming meeting of major oil producers in Doha in April that was intended to set in motion a plan to freeze production at January's highs.

"You mix that with outages in Nigeria ... and put Doha on top of it, and your eyes are looking towards the tightening of the market," said Bjarne Schieldrop, chief commodities analyst at SEB Bank in Oslo.


(Additional reporting by Libby George in LONDON Editing by Dale Hudson, Susan Thomas and Chizu Nomiyama)