Oil pares losses

Perth - Oil climbed back above $70 a barrel on Wednesday, paring some of the previous session's losses, as an industry inventory report showing a larger-than-expected fall in US crude stocks buoyed hopes of a demand recovery and encouraged buying.

The American Petroleum Institute said that domestic crude stocks fell 6.8 million barrels to 349.7 million barrels last week, against analysts forecast for a much smaller drawdown of just 2 million barrels.

This helped turn crude around from a 2% overnight loss, after a drop in US consumer confidence added to concerns about a potential economic rebound.

US crude for August delivery rose 59c to $70.48 a barrel by 01:24 GMT. The contract settled down $1.60 at $69.89 a barrel on Tuesday, after earlier rising to an eight-month high of $73.38.

London Brent crude rose 66c to $69.96 a barrel.

"The US consumer confidence report was a negative for the oil price but in late news, reports by the American Petroleum Institute that crude stocks fell by 6.8 million barrels helped to lift sentiment," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

The API data also showed gasoline stocks rose by a less-than-expected 209,000 barrels and distillate stocks, which include heating oil and diesel fuel, increased by 723 000 barrels.

The API report is regarded as a precursor to more authoritative numbers issued by the US Energy Information Administration at 14:30 on Wednesday.

Economic data from Japan, the world's third-largest energy consumer, also added to positive sentiment.

Japan's business confidence pulled back from a record low hit three months ago, the Bank of Japan's quarterly Tankan survey showed, the first rise in 2-½ years as reviving global trade boosts the country's big exporters.

Analysts said US unemployment and housing data, due later on Wednesday, will give the next clues on how the world's economies are faring.

- Reuters