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. Last Updated: 07/27/2016

Oil Prices Surge As Russia Moves to Slash Exports

LONDON -- Oil prices sped higher Wednesday following a reported fall in U.S. gasoline stockpiles and a decision by Russia to slash exports of refined products.

Brent crude for September delivery was trading 50 cents better, at $19.90 a barrel, on the London market at about lunchtime, reversing an early dip to a session low of $19.25 and within 5 cents of the 20-month peak touched Friday.

The U.S. Department of Energy reported that U.S. gasoline inventories had fallen by about 1 million barrels and crude stockpiles slid by 3.4 million barrels in the week to July 30.

That report contradicted an earlier bearish estimate by the American Petroleum Institute industry group that said U.S. gasoline stocks had actually risen by almost 2 million barrels.

Prices earlier firmed on a Russian decision to halt gasoline exports and cut diesel and fuel oil exports to 30 percent of refinery output in August to boost domestic supplies.

Russia's net refined product exports have run at about 1 million barrels per day in recent years and are forecast by the GAPMER consultancy in Moscow to run about 1 million to 1.1 million barrels per day this year.

Russia's regions have recently complained of shortages of oil products needed for the annual harvest, but the government decided against imposing export tariffs.

The market drew further support from a reduction by 70,000 bpd in Royal Dutch/Shell's output from the North Sea after lightning cut power to a natural gas plant. The company normally pumps more than 500,000 bpd from the North Sea.

Prices now are fully double the historic lows touched around the turn of the year.

The market continues to be supported by indications from the Organization of Petroleum Exporting Countries that it will keep abiding by an agreement reached in March aimed at curbing supplies.

The output cuts, due to last until the end of March 2000 and implemented in concert with some non-OPEC producers, are aimed at slicing global oversupply, which dragged prices to sub-$10 lows at the start of the year.

Morgan Stanley Dean Witter said it had increased its price forecast for Brent for this year to $16.25 a barrel from $14.75.