London (AFP) – Global oil prices rallied Wednesday as sliding US gasoline and distillates inventories eclipsed news that soaring crude reserves hit another record high last week.

Brent North Sea crude for April delivery jumped $1.04 to stand at $59.70 a barrel in London late afternoon deals.

New York’s benchmark West Texas Intermediate (WTI) for April rose 65 cents to $49.93 a barrel.

The US government’s Department of Energy (DoE) said Wednesday that crude inventories rose 8.4 million barrels in the week to February 20 to a record 434.1 million barrels.

The increase was also more than double market expectations for a 3.7-million-barrel gain, according to analysts polled by Bloomberg.

However, the DoE also reported that stockpiles of distillates, which include diesel and heating fuel, slid 2.7 million barrels while gasoline or petrol reserves sank by 3.1 million.

“The rally … was fuelled by news that both gasoline and distillate stocks had decreased sharply last week,” said Forex.com analyst Fawad Razaqzada. Falling stockpiles indicate strengthening demand.

World oil prices had initially fallen Wednesday following news of record-high US crude inventories.

“The US oil glut has continued to grow in recent weeks, causing inventories to swell to record levels,” added Razaqzada.

Prices sank earlier this week as traders worried about abundant global supplies alongside slower economic growth.

The market was also digesting US President Barack Obama’s decision on Tuesday to veto legislation allowing the Keystone XL oil pipeline to be built between Canada and the United States.

The 1,180-mile (1,900-kilometre) TransCanada-built pipeline would transport crude from energy-rich Alberta to a network of pipelines that reach across the United States to the shores of the Gulf of Mexico.

Obama says he is not against the project in principle, but accused legislators of trying to “circumvent longstanding and proven processes” for gauging whether Keystone is in the national interest.

The project has in recent years pitted environmental groups against the oil industry, which has argued that it will bring much-needed jobs to the United States and help it achieve energy self-sufficiency.