Oil futures settle higher, at $78.68, rebounding from four-year-low

Reuters with staff
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U.S. oil futures settled up $1.49 at $78.68 per barrel, rebounding from a four-year-low in the previous session as traders reacted to rumors of a pipeline blast in Saudi Arabia and bullish U.S. crude stocks data.

Data from the Energy Information Administration showed U.S. crude inventories rose 460,000 barrels last week, significantly less than the 2.2 million barrels predicted by analysts in a Reuters poll.

A Saudi Arabian security source said a fire that broke out during repair work at an oil pipeline 156 miles north of the Saudi Arabian capital, Riyadh, was under control, and no terror act was involved. An unconfirmed market rumor of an oil pipeline explosion in Saudi Arabia had sent the market surging earlier.

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"The Saudi rumor definitely shook things up, given that we're living in a world full of threats to oil supply. But we did calm down after that and step back and look at the bigger picture of what the inventories meant," said Phil Flynn, an analyst at Price Futures Group in Chicago.

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Brent oil surged to above $84 a barrel from a 2010 low beneath $82, before returning to trade at around $83.

Stocks of gasoline and diesel also fell, suggesting greater-than-anticipated demand for fuel in the world's largest oil consumer.

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"The report was solidly bullish given the further declines in the refined product categories," said John Kilduff, a partner at Again Capital LLC in New York.

"The smallish crude oil build is also supportive because it disappointed relative to expectations."

Oil prices also rose on supportive U.S. employment data. The U.S. private sector created 230,000 jobs in October, more than the 220,000 forecast by economists, according to data provided by a payrolls processor.

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Services sector growth in China weakened in October as new business cooled, a private survey showed, coming just days after data revealed sluggish factory growth in the world's second-largest economy.

Euro zone business growth picked up less than expected in October despite much deeper price cutting and was only marginally higher than September's 10-month low, according to business surveys.

The index hit a new 4-1/2-year high on Wednesday, weighing on oil and driving gold prices to their lowest since April 2010.

Oil prices on both sides of the Atlantic lost more than 2 percent on Tuesday after Saudi Arabia cut export prices to the United States, threatening to deepen a global supply glut that has driven crude prices down 30 percent since June.

--CNBC contributed to this report.