Oil climbs despite inventory surge, global instability wins the day

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Crude rose in choppy trading on Wednesday, with Brent recovering from a 13-month low as turmoil in Iraq and Libya kept concerns about potential supply disruptions in focus.

Separately, U.S. crude prices rose despite the U.S. Energy Information Administration (EIA) reporting crude oil inventories rose 1.4 million barrels last week, against expectations stocks would be lower. The U.S. crude oil stocks build included a 418,000-barrel increase at Cushing, Oklahoma, delivery point for the U.S. crude contract traded on the New York Mercantile Exchange.

September Brent crude rose by more than $1 to over $103 a barrel. The contract, which expires on Thursday, fell as low as $102.37, the weakest for a front-month since July 1, 2013. U.S. crude rose 22 cents to end at $97.59 a barrel, after hitting its weakest since February.

Brent, the international oil benchmark, has fallen 11 percent since mid-June as a surge by Islamic State militants in northern Iraq has not yet created major supply outages, while global crude output has been rising. But traders said some in the market remained cautious, and were looking to buy contracts as prices fell towards the $100 level.

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Exports from Libya are recovering despite the worst unrest in the country since 2011, with the first tanker leaving the port of Ras Lanuf on Tuesday since the end of a year-long harbor blockade.

Demand in China, the world's second-largest oil consumer, also slipped last month, preliminary government data showed on Wednesday, with implied oil consumption down 2 percent from a year earlier, Reuters calculations based on preliminary government data showed.

Output from the Organization of the Petroleum Exporting Countries (OPEC) rose to a five-month high above 30 million barrels per day (bpd) in July, the International Energy Agency said on Tuesday.

The EIA said on Tuesday that U.S. crude production averaged an estimated 8.5 million bpd in July, the highest level since April 1987.

--By Reuters