Oil jumps $4 after surprise U.S. gasoline stock draw

NEW YORK (Reuters) - Oil rose more than $4 on Wednesday after U.S. government data showed an unexpected drop in gasoline stocks as suppliers facing weak consumer demand cut production and imports.

U.S. crude rose $4.25 to $126.44 a barrel by 1:54 p.m. EDT (1754 GMT) after falling to $120.42 on Tuesday, the lowest level since May 6. London Brent crude rose $4.09 to $126.80 a barrel.

U.S. gasoline stocks fell by 3.5 million barrels last week, according to the U.S. Energy Information Administration, countering analyst calls for a 200,000 barrel build.

"The report offers the bulls more potential than they have had over the last few weeks," said Rob Kurzatkowski, analyst at OptionsXpress in Chicago.

The EIA report also showed U.S. crude oil stocks dropped by 100,000 barrels, lower than analysts forecasts. Distillate stocks rose 2.4 million barrels, more than expected.

Oil has plunged from a record $147.27 hit on July 11, in the steepest drop from a high since early 2007, pressured by signs that costly fuel and wider economic problems are curbing demand, especially in the United States.

Strong growth from emerging economies like China has stretched poor supply growth over the past six years, launching a rally that sent crude up sevenfold at its peak.

Further support has come from investors buying commodities as a hedge against inflation and the weak dollar, tensions between Iran and the West and supply disruptions.

Iran's supreme leader, Ayatollah Ali Khamenei, said on Wednesday Tehran would pursue its nuclear path, despite a deadline set by world powers in the dispute over Tehran's nuclear program.