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Oil prices surge 3% as report shows 8.1 million barrel drop in US stockpiles

Oil prices spiked higher after the close of Tuesday's session after an industry report suggested U.S. crude inventories fell more than expected.

The American Petroleum Institute reported U.S. crude stockpiles declined by 8.1 million barrels for the week ended July 7. Gasoline stocks also fell by about 800,000 barrels, API reported.

Analysts polled by Reuters forecast that U.S. crude inventories fell 3.2 million barrels while gasoline and distillate stocks each rose by 1.5 million barrels.

U.S. light crude rose more than 3 percent to $45.76 by 4:51 p.m. ET (2051 GMT) . They ended Tuesday's session 1.4 percent higher at $45.04. Benchmark Brent crude was up $1.31, or 2.8 percent, at $48.19 a barrel.

The U.S. Energy Information Administration reports official figures Wednesday morning.

Oil prices reversed early losses earlier on Tuesday after the U.S. Energy Information Administration cut its forecast for U.S. oil production next year and a report showed European product stockpiles fell.

The EIA now sees U.S. production averaging 9.9 million barrels a day in 2018, down from last month's forecast of 10 million barrels a day.

European refineries increased their crude oil intake in June, and stocks of oil products, particularly diesel, slid, Euroilstock data showed on Tuesday.

"That tells you demand globally is a lot stronger than people thought it was going to be and that is having a net positive effect on heating and gasoline prices," said Scott Shelton, energy specialist at energy brokerage ICAP in Durham, North Carolina.

Crude prices had slipped in earlier trade, pressured by bank forecasts for declines this year and in 2018.

BNP Paribas slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018. Barclays also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively.

Crude prices remain about 17 percent below 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries to cut production from January.

OPEC agreed with Russia and some other major exporters to cut output about 1.8 million barrels per day (bpd) until March 2018. But production elsewhere has risen as OPEC has held back.

U.S. oil production has jumped more than 10 percent over the last year to 9.34 million bpd. Nigeria and Libya, OPEC members exempt from production limits, have also increased output.

OPEC oil output rose in June by more than 300,000 barrels per day, (bpd) according to figures the exporter group uses to monitor its supply.

Including Nigeria and Libya, output by all 13 OPEC members in June rose to about 32.47 million bpd, according to the average assessments of secondary sources OPEC uses to monitor its output.

Production from the 11 OPEC members with output targets under the agreement has averaged 29.84 million bpd in June, according to the secondary sources. That means compliance in June is 97 percent, according to an OPEC calculation. That is lower than in May, as OPEC's published figures for that month point to compliance above 100 percent.

Without a significant fall in oil inventories or a decline in U.S. drilling and production, Goldman Sachs said U.S. crude could drop below $40 per barrel.

— CNBC's Tom DiChristopher contributed to this report.