Oil prices rose Wednesday after the government's weekly U.S. petroleum supply report showed a large and unexpected decline in gasoline stockpiles.
Traders overlooked a surprising buildup in crude oil inventories.
"This is indeed a bearish report for crude oil," said Tim Evans, energy analyst at Citigroup Global Markets. "But right now, (traders) don't care nearly as much about crude oil as we do about gas."
The report by the U.S.
Department of Energy's Energy Information Administration showed that crude oil inventories rose by 2.1 million barrels in the week ending Friday to 334.5 million barrels. Traders had expected crude oil inventories to fall by 1.2 million barrels on average, according to a Dow Jones Newswires survey of analyst estimates.
On the other hand, gasoline inventories fell by 2.8 million barrels. Analysts had expected a 200,000-barrel increase in gasoline inventories. Distillate stockpiles, which include heating oil and diesel fuel, remained flat as heating oil inventories fell while diesel stockpiles rose.
The report also showed that refinery utilitzation fell 2.6 percent.
Light, sweet crude for June delivery rose 56 cents to $65.14 in late morning trading on the New York Mercantile Exchange. The contract fell $1.31 a barrel on Tuesday.
Brent crude for June delivery gained 96 cents to $68.12 a barrel on the ICE Futures exchange in London.
Gasoline futures, which one would expect to rise strongly on the report, gained 3.26 cents to $2.2415 a gallon.
"So far, I'm not impressed with the size of the (gasoline) rally," Evans said, suggesting gasoline futures prices could rise further. "This is a severe decline in gasoline inventories."
"On any given day, markets still have the capacity to defy and baffle us," wrote Man Energy analyst Edward Meir in a research note issued before the government's report. Meir suggested that trading on energy markets will be volatile this week regardless of what the EIA report showed.
Evans and other analysts worry whether there is enough gasoline to meet summer driving demand.
"Market participants are concerned that, even though U.S. refineries are increasing production, they will not be able to fully satisfy demand ahead of the busy summer driving season," said Michael Davies, an oil analyst at Sucden in London.
"We're basically at the lowest level since Oct. 7, 2005," Evans said of gasoline inventories. "We've got this real scary low level of inventory."
But, he added, "(Refiners) do have an impressive track record of catching up on supply at the last moment."
In other Nymex trading, heating oil futures rose 2.94 cents to $1.8754 a gallon, while natural gas prices fell 2.1 cents to $7.577 per 1,000 cubic feet.
Your Ads At Here
