UPDATE 10-Oil rallies past 8-mth high on U.S. crude inventory draw, vaccine hopes

* U.S. crude stockpiles fall unexpectedly, gasoline builds
-EIA
* Dollar near a 3-month low ahead of Thanksgiving
* Brent Jan/Feb backwardation hits widest since July
* OPEC+ leaning towards oil cut extension, despite rally -
sources

(Updates to settlement)
By Devika Krishna Kumar
NEW YORK, Nov 25 (Reuters) - Oil prices climbed nearly 2% to
their highest in more than eight months on Wednesday, as data
showing a surprise drop in weekly U.S. crude inventories
extended a rally driven by hopes that a COVID-19 vaccine will
boost fuel demand.
Brent crude LCOc1 rose 75 cents, or 1.6%, to settle at
$48.61 a barrel, its highest since early March.
U.S. West Texas Intermediate crude CLc1 also closed at its
highest since early March, rising 80 cents, or 1.8%, to $45.71.
Both benchmarks, which gained 4% on Tuesday, rose for a
fourth straight session.
U.S. crude inventories fell by 754,000 barrels last week,
government data showed, surprising analysts who in a Reuters
poll had predicted a 127,000-barrel rise. Inventories at
Cushing, Oklahoma, the delivery point for WTI, fell by 1.7
million barrels. EIA/S
"There was a decent drawdown at Cushing, so that's
supportive. It was probably the most bullish aspect of this
report," John Kilduff, partner at Again Capital LLC in New York.
Still, demand worries capped price gains as U.S. weekly
gasoline demand dropped by about 128,000 barrels per day (bpd)
to 8.13 million bpd, the lowest since June 2020. On Monday, investor hopes got a boost as AstraZeneca AZN.L
said its COVID-19 vaccine could be up to 90% effective.
"Crude oil prices are trading at their highest levels since
early March, supported by positive market sentiment as a result
of vaccine news and strong oil demand in Asia," said UBS oil
analyst Giovanni Staunovo.
"We maintain our bullish outlook for next year and target
Brent to hit $60 per barrel at the end of 2021," he added.
A weaker dollar .DXY also supported crude prices, making
greenback-denominated oil less expensive for buyers holding
other currencies. "The recent depreciation of the U.S. dollar has helped
temper the impact of surging oil prices for some of the world's
largest consumers of energy," said Stephen Brennock of broker
PVM.
Brent has moved into backwardation, a market structure in
which oil for immediate delivery costs more than supply later.
Backwardation encourages inventories to be drawn down and
suggests receding fears of a glut.
Brent futures for February delivery traded as much as 14
cents above the January contract LCOc1-LCOc2 , the highest
since July, before settling at an 8-cent premium.
"Positive vaccine news and swift deployment views are behind
a significant part of this move in the curve, supported by
increasingly firm beliefs by the market that OPEC+ will extend
its current output targets for Q1 2021," said Rystad Energy's
analyst Bjornar Tonhaugen.
OPEC+, made up of the Organization of the Petroleum
Exporting Countries (OPEC) and allies including Russia, is
leaning towards delaying next year's planned increase in output
despite a rise in prices, three sources close to OPEC+ said.
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