Oil rebounds from early losses on drop in fuel supplies

Source: Agencies  |   2008-6-19  |     ONLINE EDITION

OIL prices rose yesterday, rebounding from earlier losses as investors focused on a surprise decline in gasoline inventories in the US last week and a potential new supply disruption in Nigeria.

The jump came after the US Energy Department's weekly crude oil and gasoline inventory report painted a mixed picture for the market.

The department's Energy Information Administration said gasoline supplies fell 1.2 million barrels last week, where analysts surveyed by energy research firm Platts were expecting an increase of nearly 1 million barrels.

The EIA also said crude oil supplies fell 1.2 million barrels last week, less than the 2 million barrel decline expected by analysts, and that demand for gasoline is down 1.8 percent, on average, over the last four weeks compared to last year. Inventories of distillates, which include heating oil and diesel fuel, rose 2.6 million barrels, more than expected.

The mixed news caused prices to jump more than a dollar immediately after the EIA report was issued, only to fall by more than US$2 later. In midafternoon trading on the New York Mercantile Exchange, light, sweet crude for July delivery climbed US$2 to US$136.01 a barrel. In London, August Brent crude rose US$1.91 to US$135.63 a barrel on the ICE Futures Exchange.

"It just seems to be a tug of war," said Phil Flynn, analyst at Alaron Trading Corp in Chicago.

Also boosting prices yesterday were events in Nigeria, Africa's largest oil producer and a major US supplier, where white-collar oil industry workers have threatened a strike against a Chevron Corp. unit. Meanwhile, the main militant group blamed for attacks that have significantly cut Nigerian oil production in recent years said it would not take part in a peace summit next month.

Separately, oil exports from Iraq and Kuwait have been disrupted for the past four days due to bad weather, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.