UPDATE 8-Oil gains after report shows larger than expected U.S. stock draws

Reuters

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    * U.S. crude stocks fall by 1.4 million barrels -EIA
    * Physical spot cargoes trade at discount to financial crude
    * Gasoline futures hit 3-1/2 year high
    * Global oil demand likely to moderate this year -IEA

 (Updates prices, adds comment)
    By Ayenat Mersie
    NEW YORK, May 16 (Reuters) - Oil prices gained on Wednesday,
shaking off the effects of a strengthening dollar, after an
inventory report showed U.S. crude and gasoline stocks fell more
than expected. 
    Brent crude futures  LCOc1  gained 85 cents to settle at
$79.28 a barrel, while U.S. crude futures gained 18 cents to
settle at $71.49 a barrel.
    "We rallied as the day went on," said Gene McGillian,
manager of market research at Tradition in Stamford. "We
continued to receive support from concerns about supply from the
Iranian nuclear accord, Venezuela ... as well as the draw in
crude," McGillian said. 
    U.S. crude inventories  USOILC=ECI  fell by 1.4 million
barrels in the week to May 11, compared with analyst
expectations for a 763,000 barrel decrease.  EIA/S 
    U.S. gasoline stocks fell 3.79 million barrels, according to
the U.S. Energy Information Administration's weekly report.
Analysts had expected a 1.42 million barrel decline. That helped
push gasoline futures  RBc1  to their highest levels since
October 2014. 
    "The strength of gasoline, which made new highs, a
3-1/2-year high today ... helped pull up crude later in the
session," said Jim Ritterbusch, president of Ritterbusch and
Associates in Galena, Illinois.
    Exports hit a new one-week record, the EIA said.
    The report pointed to healthy demand for U.S. crude,
Commerzbank analyst Carsten Fritsch said.
    In Venezuela, production plunged to 1.5 million barrels last
month, its lowest level in decades due to its ongoing economic
crisis.  urn:newsml:reuters.com:*:nL8N1S73W2 
    Meanwhile, the dollar  .DXY  firmed to nearly a five-month
high against a basket of other major currencies on Wednesday. A
stronger greenback makes it more expensive to buy
dollar-denominated commodities such as oil.  
    While futures prices climb, physical crude markets are
sagging under the weight of unsold barrels. The 50 percent rise
in oil prices in the last year is encouraging major companies
such as ExxonMobil  XOM.N , Royal Dutch Shell  RDSa.L , Chevron
 CVX.N , BP  BP.L  and Total  TOTF.PA  to increase output.
    Spot crude oil cargo prices are at their steepest discounts
to futures prices in years as sellers struggle to find buyers
for West African, Russian and Kazakh cargoes, while pipeline
bottlenecks trap supply in West Texas and Canada.  urn:newsml:reuters.com:*:nL2N1SL1OH  
    The International Energy Agency warned global demand is
likely to moderate this year as crude prices near $80 a barrel
and many key importing countries no longer offer consumers
generous fuel subsidies.
    In its monthly report, the Paris-based IEA cut its forecast
for 2018 global demand growth to 1.4 million barrels per day,
from 1.5 million bpd.  IEA/M 
    "On balance, the report is tending more to the negative
side. Demand for oil has been revised downwards for the second
half of the year from April," PVM Oil Associates strategist
Tamas Varga said.

 (Additional reporting by Amanda Cooper in LONDON and Henning
Gloystein in SINGAPORE; Editing by Mark Potter, Paul Simao and
Susan Thomas)
 ((ayenat.mersie@thomsonreuters.com; +1646 223 4165))

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