NYMEX-Crude hits $65 on steep inventory drop

* EIA: Crude, gasoline stocks down and distillates up

* Durable goods, jobless claims data better than expected

* OPEC keeps output targets unchanged at Vienna meeting

NEW YORK, May 28 (Reuters) - U.S. crude oil futures surged
above $65 on Thursday, setting a fresh high for the year, as
they continued to rally after government data showed a steepl
drop in oil inventories last week.

Traders also factored in better-than expected economic data
and OPEC's decision to hold production to current levels.

Gasoline futures traded well below their early, seven-month
high, after data showed a lower than expected drawdown and
pressured by position squaring ahead of front-month refined
product futures expiration on Friday.

Heating oil futures gained, on data showing a far less than
forecast inventory increase.

"It was definitely bullish for crude oil. No one was
expecting a draw like that as the refinery rates soared much
higher than expected. That's the shocking number," said Mike
Zarembski, senior commodities analiyst at optionsXpress in
Chicago.

"The gasoline draw wasn't nearly as big as expected, but we
had a large increase in demand. That was a mixed message," he
added.

In its meeting in Vienna, OPEC kept output targets
unchanged, as expected, betting on a strengthening world
economy and tentative signs of increased demand to boost oil
prices. [ID:nLS12120]

PRICES

* On the New York Mercantile Exchange at 1:15 p.m. EDT
(1715 GMT), July crude CLN9 was up $1.56, or 2.46 percent, at
$65.01 a barrel, trading from $62.75 to $65.23, the highest
intraday price since $65.56 was hit on Nov. 10.

* In London, July Brent crude LCON9 was up $1.73, or 2.77
percent, at $64.23 a barrel, trading from $61.78 to $64.40.

* NYMEX June RBOB RBM9 edged up 0.51 cent, or 0.27
percent, to $1.8968 a gallon, trading from $1.8685 to $1.91,
the highest intraday price since Oct. 14.

* NYMEX June heating oil HOM9 rose 3.79 cents, or 2.43
percent, to $1.5996 a gallon, trading from $1.5475 to $1.6070.

* The July/July RBOB crack spread <0#RB-CL=R> was at
$13.16. It ended at $14.46 on Wednesday. The July/July heating
oil crack spread <0#CL-HO=R> was at $3.42. It ended at $3.26 on
Wednesday.

* The spread between the current front month and the
five-year forward crude contract CLc61 was at $11.40, based
on the July 2014 contract settlement on Wednesday at $76.41.
The spread ended at $12.96 on Wednesday.

MARKET NEWS

* The Energy Information Administration said that for the
week to May 22, crude inventories fell 5.4 million barrels to
363.1 million barrels, against the forecast in a Reuters poll
for a 700,000-barrel drawdown. [EIA/S]

* Crude stocks at the NYMEX delivery hub at Cushing,
Oklahoma, rose 1.1 million barrels to 30.7 million barrels.

* Gasoline stocks fell 600,000 barrels to 203.4 million
barrels, far less than the forecast for a decline of 1.5
million barrels.

* Gasoline demand rose to 9.5 million barrels per day, from
9.2 million bpd the week before, reflecting buying ahead of
last weekend's Memorial Day holiday.

* Distillate supplies rose 300,000 barrels to 120.1 million
barrels. The forecast was for a build of 1.1 million barrels.

* Refinery runs jumped 3.3 percentage points to 85.1
percent of capacity, dwarfing the forecast for a rise of 0.4
percentage point.

* The American Petroleum Institute said Wednesday domestic
crude stocks fell 2.8 million barrels last week, gasoline
stocks dropped 758,000 barrels and distillate stocks rose 1.4
million barrels. [API/S]

* The number of U.S. workers filing new claims for jobless
pay dropped by 13,000 last week, the Labor Department reported,
but continued claims hit a new record. [ID:nN28314799]

* U.S. durable goods orders rose more than expected in
April, posting their biggest gain in 16 months.[ID:nN27221554]

* Wall Street rose as higher oil prices lifted shares of
major oil companies, reversing an earlier decline due to lower
home sales data. [.N]

* Sales of newly built U.S. single-family homes rose
slightly less than expected in April. [ID:nLS258119]

* The U.S. dollar pared losses against the euro after the
U.S. housing data. [USD/]

* OPEC Secretary-General Abdullah al-Badri said U.S. demand
had started to pick up and OPEC was "seeing demand in China and
India and Asia as a whole." [ID:nLAE000031]
(Reporting by Gene Ramos and Robert Gibbons; Editing by David
Gregorio)