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Oil hovers below $82 amid US crude inventory drop

Oil prices hovered below $82 a barrel Wednesday after a report showed U.S. crude supplies fell more than expected last week.

By early afternoon in Europe, benchmark crude for February delivery was down 24 cents to $81.53 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract rose 26 cents to settle at $81.77 a barrel, a 14-month high.

Traders closely study U.S. inventory data for signs of consumer demand trends, and crude supplies fell 2.3 million barrels last week, the American Petroleum Institute said late Tuesday.

Analysts had expected a drop of 1.6 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department’s Energy Information Administration plans to announce its inventory report – the market benchmark – later Wednesday.

Oil has surged about 15 percent since mid-December as colder weather in the U.S. boosts demand for crude products such as heating oil.

Tuesday’s API report, however, showed a buildup in such products, which could be a sign that the falling temperatures may not continue supporting the market as much as some have expected.

"The latest build in distillate stocks should provide a slap in the face of bulls who relied on cold temperatures as a wonder cure," said JBC Energy in Vienna.

Oil prices were also being kept from rising for the 10th straight session by the stronger dollar, which make dollar-denominated oil more expensive for investors holding other currencies.

In midday European trade, the euro was down to $1.4348 from $1.4369 late Tuesday in New York, while the British pound fell to $1.5979 from $1.6002 and dollar rose to 92.44 Japanese yen from 91.74 yen.

In other Nymex trading in February contracts, heating oil fell 1.62 cents to $2.1779 a gallon and gasoline slid 1.87 cents to $2.1063 a gallon. Natural gas futures rose 9.8 cents to $5.735.

In London, Brent crude for February delivery fell 31 cents to $80.26 a barrel on the ICE Futures exchange.

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