* Brent, U.S. crude settle up more than $2 a barrel each
* Market up over $1 in early trade on talk of algorithmic
trade
* EIA added to gains later, reporting crude build below API
data
* Gains briefly pared by dollar's rise on likely Fed move in
Dec
(Adds settlement prices, dollar surge, Cushing oil stock data)
By Barani Krishnan
NEW YORK, Oct 28 (Reuters) - U.S. crude oil prices rose 6
percent on Wednesday after the government reported an inventory
build that reversed bearish market expectations, extending gains
from an earlier rally triggered by what was described as a big
algorithmic trade.
The price spike snapped three straight days of losses,
stalling oil bears' expectations for a longer and deeper price
rout after two-month lows hit in the previous session on worries
about high supplies and weak demand.
Oil pared gains briefly in afternoon trade as the dollar
.DXY surged on bets the Federal Reserve was still open to
raising U.S. interest rates in December, after dismissing an
immediate hike on Wednesday. urn:newsml:reuters.com:*:nL1N12R2IF
U.S. crude CLc1 settled up $2.74 at $45.94 a barrel, after
hitting a session high at $46.01.
Brent LCOc1 , the global benchmark for oil, closed up $2.24
at $49.05.
U.S. crude's rise of 6 percent was the largest in two
months. Brent's 5 percent advance was the biggest in three
weeks.
Prices surged within 30 minutes of the start of the official
session in New York, jumping more than $1 with many traders
citing a big algorithmic trade for the hike.
The U.S. Energy Information Administration (EIA) added to
the rally when it reported that crude stockpiles rose 3.4
million barrels last week, matching analysts forecasts in a
Reuters poll. But the build was still below the 4.1
million-barrel inventory hike cited on Tuesday by industry group
the American Petroleum Institute. EIA/S API/S
"The market was looking for more bearish information and got
a neutral report," Scott Shelton, energy broker and commodities
specialist with ICAP (L:IAP) in Durham, North Carolina.
While stockpiles of oil across the United States fell, the
market's attention was particularly riveted by a 785,000-barrel
decline at the Cushing, Oklahoma, delivery hub for U.S. crude
futures. Cushing inventories are closely watched in EIA reports,
and major changes often cause price swings.
The EIA also said that stockpiles of gasoline and
distillates, which include diesel, fell more than expected. U.S.
gasoline RBc1 and ultra-low sulfur diesel HOc1 futures
gained more than 4 percent ahead of their contract expirations
on Friday.
But some traders bet prices would turn lower eventually,
saying whatever reported by the EIA was only mildly bullish.
"I think any rallies should be sold into since we expect to
continue seeing builds in the weeks to come," said Tariq Zahir,
trader in crude oil spreads at Tyche Capital Advisors in Laurel
Hollow, New York.
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Chart on Brent oil http://graphics.thomsonreuters.com/US/2/PVB_20152810092145.png
Chart on U.S. oil http://graphics.thomsonreuters.com/US/2/PVB_20152810091039.png
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