UPDATE 1-Oil up above $77 on US crude stock drop, dlr pauses

Published: 24 Dec 2009 17:19:52 PST

* Oil jumps to highest since Dec. 4

* EIA data show surprise falls in U.S. crude, fuel stocks

* Dollar eases, supports oil; eyes on U.S. jobless data (Updates prices, Japan stocks data)

SINGAPORE, Dec 24 - Oil rose above $77 on Thursday, after surging more than 3 percent the previous day, lifted by a deeper-than-forecast drop in crude and fuel stocks in the world's top energy consumer and as the dollar paused.

The dollar's recent rally stalled on news of a surprise drop in U.S. home sales that damped optimism about the economy, holding the currency below a three-month high against the euro and two-month high on the yen.

U.S. crude for February delivery rose 73 cents at $77.40 a barrel by 0704 GMT, the highest since Dec. 4, after settling up $2.27 on Wednesday. The contract has gained about $7 since Dec. 14, when it hit a near 2-½ month low.

London Brent crude gained 67 cents to $76.12.

"Before the Christmas and holiday season by the end of last week, momentum of the crude oil market was quite bearish and the market has been a little bid oversold," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.

"But the EIA data were much more positive than the market had expected, so many factors are now quite bullish," he said. "I think the market is heading towards the upside, probably will hold the level by the end of the year."

U.S. commercial crude oil stockpiles fell 4.9 million barrels to 327.5 million barrels last week, inventory data from the Energy Information Administration (EIA) showed, far exceeding the 900,000-barrel drop forecast by analysts.

Lower imports into the United States and year-end drawdowns in crude stocks for tax purposes were the main reasons for the decline, analysts said. Distillate stocks fell a larger-than-expected 3.1 million barrels, while gasoline showed a surprise drop of 900,000 barrels.

DRAWDOWNS ELSEWHERE

Gasoline and gas oil inventories held in independent storage in Europe's oil hub also fell over the past week on increased demand ahead of the holidays, Dutch oil analyst Pieter Kulsen said on Wednesday.

Gas oil kept in independent tanks in Amsterdam-Rotterdam-Antwerp eased to 2.873 million tonnes as of Wednesday, down for the first time since the week to Nov. 26.

And in Japan, the world's third-largest oil user, commercial crude stocks eased last week from an eight-week high hit the week before.

Total inventories of unfinished oil fell to their lowest since at least 2006, suggesting a weak outlook from oil firms, as Japan struggles with lower energy demand which will not get any help from a milder-than-average winter weather in the first quarter of next year.

Oil rallied as the dollar took a breather from its recent run-up, with the dollar index versus a currency basket hovering under this week's three-month high, as trading activity wound down before Christmas. Gold also rose while Asian stocks rallied.

Oil has often risen this year when the dollar softens, making crude more affordable for holders of other currencies.

Attention will turn to weekly U.S. jobless claims and durable goods figures later on Thursday as the market tries to assess if a recent improvement in monthly payrolls will be sustained and what that means for the timing of U.S. interest rate increases.