UPDATE 9-Oil up 3 pct after U.S. crude stocks drop, trade thin

* EIA reports 5.88 million barrel draw
* Demand for OPEC crude to fall by 2020 - OPEC
* Iraq signs crude supply term contracts with two Indian
refiners

(New throughout, updates prices and market activity, adds
analyst comment; new byline, changes dateline, previously
LONDON)
By Catherine Ngai
TORONTO, Dec 23 (Reuters) - Oil rose more than 3 percent on
Wednesday in thin, pre-holiday trading, buoyed by a surprise
drop in U.S. crude inventories, but prices stayed near
multi-year lows as global supplies remained abundant and OPEC
lowered the demand outlook for its exports.
Ahead of the Christmas holiday on Friday, volume in the
front-month U.S. crude contract was around 265,000 lots by
midday, slightly less than the 294,000 lots on Tuesday,
according to Thomson Reuters Eikon data.
At 12:40 p.m. EST (1740 GMT), West Texas Intermediate
futures CLc1 were up $1.38 at $37.52 a barrel, while Brent
crude futures LCOc1 were up 99 cents at $37.10 a barrel.
A day earlier Brent touched $35.98, its lowest since July
2004.
U.S crude inventories fell 5.88 million barrels to 484.78
million last week compared with a forecast rise of 1.4 million,
the Energy Information Administration (EIA) said.
"The inventory draw painted a good picture for the bulls
because it was larger than a lot of people were expecting," said
Oliver Sloup, director of managed futures at iiTrader.com in
Chicago. "It's prompting some short covering going into the
holiday week and we're seeing some house cleaning by a lot of
traders."
On Wednesday, the front-month WTI contract traded as much as
56 cents over Brent, inverting a long-standing discount
following last week's signing into law a bill repealing the
decades-old U.S. crude ban.
Although no immediate large-scale exports are expected,
Enterprise Products Partners on Wednesday said it won its first
contract to export U.S. crude oil for trader Vitol in what may
become the first such cargo.
Meanwhile, the Organization of the Petroleum Exporting
Countries (OPEC) in a report on Wednesday forecast that demand
for its crude would be lower in 2020 than in 2016 as rival
producers prove more resilient than expected in a low oil price
environment.
It forecast 2020 demand for OPEC crude at 30.7 million
barrels per day (bpd) versus 30.9 million bpd in 2016 and about
1 million bpd less than it is currently producing.
Saudi King Salman said on Wednesday the kingdom was
concerned about the stability of the oil market, but added that
Saudi Arabia remained committed to further exploration
activities in the oil and gas sectors. and

Iran is expected to add 500,000 bpd of crude exports next
year and Iranian officials have already met with Indian refiners
seeking proposals on how to make their crude more competitive.


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