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Oil Futures Settle At 4-month High After Inventory Data

Oil prices rallied sharply on Wednesday after data showed U.S. crude inventory unexpectedly dropped last week.

OPEC-led output cuts, sanctions on Iran and Venezuela and Saudi Arabia's plans to cut its crude oil exports in April, all contributed to crude oil's sharp upmove today.

West Texas Intermediate Crude oil futures for April ended up $1.39, or 2.4%, at $58.26 a barrel, the highest settlement in four months.

On Tuesday, crude oil futures for April ended up $0.08, or 0.1%, at $56.87 a barrel.

Data released by the Energy Information Administration (EIA) this morning showed that crude oil inventories declined by 3.86 million barrels in the week to March 8, as against forecasts for a 2.6 million increase. A week earlier, crude inventories had increased by over 7 million barrels, more than thrice the expected rise.

Gasoline inventories were down 4.62 million barrels last week, nearly twice the expected drop. Meanwhile, distillates stockpiles unexpectedly increased by 0.38 million barrels.

The EIA said the pace of demand growth could be slower than what was thought just a month ago. The report said U.S. crude oil production averaged 11.9 million barrels per day in February, lower than the January average. The EIA now expects U.S. oil production to average 12.3 million barrels per day this year and 13.0 million barrels per day next year.

Earlier this week, Saudi Energy Minister Khalid al-Falih said production cuts by the OPEC and allies, including Russia, would likely continue until June, at least.

Saudi Arabia said that it is planning to cut its crude oil exports in April to below 7 million barrels per day and keep its output well below 10 million barrels per day.

U.S. said it plans to impose "very significant" Venezuela-related sanctions against financial institutions in the coming days.

Meanwhile, Venezuela is struggling with the most massive blackout in its history. A devastating electricity blackout swept over Venezuela late last week, crippling daily life for much of the country.

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