Oil prices plunge as drop in US inventories encourage more production

Oil prices rose to near eight-week highs on Wednesday, as a fall in US inventories bolstered expectations that the long-oversupplied market was moving toward balance.

Brent crude futures rose 40 cents to $50.60 a barrel by 1213 GMT, after rallying more than 3 percent on Tuesday.

U.S. West Texas Intermediate futures climbed 50 cents to $48.39 a barrel.

U.S. crude stockpiles fell sharply last week as refineries boosted output, while gasoline inventories increased and distillate stocks decreased, the industry group the American Petroleum Institute said on Tuesday.

Crude inventories fell 10.2 million barrels in the week ending July 21 to 487 million, more than the expected decrease of 2.6 million barrels. Data from the U.S. Energy Information Administration on Wednesday could provide more support, with forecasts of a drop for a fourth week in a row.

Tuesday's stock draw added to hopes the long-awaited oil market rebalancing was underway. Saudi Arabia said on Monday it would limit oil exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.
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