Oil prices head back toward highs

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Oil prices headed back toward record highs after an unexpected fall in US stockpiles of crude sparked supply fears ahead of the winter months.

US sweet, light crude rose $1.83 to $87.10 a barrel, while London Brent climbed $1.52 to $84.37.

US crude oil stocks fell by 5.3 million barrels last week, government data showed, when analysts had been expecting a rise in inventory.

Oil rose to a peak of $90.07 last week due to a weak dollar and supply fears.

Geopolitical tensions, with Turkish fighters flying raids along the Iraqi border on Kurdish rebel positions, have also been a factor in the oil price rally.

But prices slipped at the beginning of this week on concerns about the health of US economy and expectations of more output from Opec.

"The debate remains very much alive as to whether the oil market remains seriously under-supplied going into winter," investment bank Citigroup said.

"A move north of $95 or a move south of $80 both appear possible right now."

A weaker US dollar makes oil a more attractive investment for holders of other currencies.