Oil Rises Above $73 in N.Y. on Larger-Than-Expected Supply Drop

Crude oil rose above $73 a barrel in New York to a three-week high after an Energy Department report showed U.S. oil and gasoline inventories fell more than expected. Crude-oil stockpiles fell 3.49 million barrels to 333.6 million in the week ended Aug. 24, the report showed. A 600,000 barrel drop was forecast, according to the median of responses by 13 analysts surveyed by Bloomberg News. Prices have fallen 6 percent this month on concern that fuel demand will decline as a credit crunch in the U.S. slows economic growth.


Crude oil for October delivery rose $1.78, or 2.5 percent, to settle at $73.51 a barrel at 2:54 p.m. on the New York Mercantile Exchange. It was the highest close since Aug. 3. Prices are up 5.5 percent from a year ago.

The market's strength over the last few days shows that fears about the credit crunch hitting demand were overstated. It will be many months before any effect on demand is felt.
Gasoline supplies fell 3.67 million barrels to 192.6 million, the lowest in almost two years, the report showed. A 2.5 million-barrel decline was expected. The drop left stockpiles 5.2 percent below the five-year average for the period, the department said. Demand for the fuel fell an average 136,000 barrels a day from a record 9.76 million a day the prior week.

The days of gasoline supply available are the lowest since at least March 1991 when the Energy Department began collecting the data. There are now 20 days of gasoline supply in storage, the department said.

Gasoline for September delivery rose 8.54 cents, or 4.2 percent, to $2.1008 a gallon in New York, the highest close since July 31. It was the biggest one-day gain since July 18. Heating oil for September delivery rose 4.56 cents, or 2.3 percent, to $2.0419, the highest since Aug. 2.

The U.S. crude-oil market often follows gasoline during the summer driving season. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.

Refinery operations and crude-oil imports also slumped last week, the report showed. Refineries operated at 90.3 percent of capacity, down 1.4 percentage point from the week before. Analysts expected the report would show no change. Crude-oil imports fell 9.2 percent to an average 9.82 million barrels a day last week.

Total SA closed a unit at its Port Arthur, Texas, refinery because of a power cut. That followed unplanned interruptions at U.S. plants run by Citgo Petroleum Corp. and by Chevron Corp., whose largest refinery is operating at reduced capacity after a fire. Other refiners are planning to make repairs next month because of the end of the driving season.
Brent crude oil for October settlement rose $1.58, or 2.2 percent, to $72.13 a barrel on the London-based ICE Futures exchange, the highest close since Aug. 3.