Crude Oil Is Steady After Rising on Gasoline Supply Decline

By Mark Shenk

Aug. 21 (Bloomberg) -- Crude oil was little changed after rising yesterday as a government report showed U.S. gasoline inventories dropped for a fourth week.

Supplies of the fuel declined 6.2 million barrels, more than double the 3 million-barrel decline analysts predicted, a U.S. Energy Department report showed. Oil stockpiles rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001.

``It looks like wholesalers are finally taking deliveries of gasoline after putting them off because of the record prices last month,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Crude oil for October delivery rose 6 cents to $115.62 a barrel at 8:41 a.m. Sydney time on the New York Mercantile Exchange. Futures are down 21 percent from a record $147.27 that was reached on July 11. Prices are up 67 percent from a year ago.

The September contract expired yesterday after increasing 45 cents, or 0.4 percent, to settle at $114.98 a barrel.

Gasoline for September delivery rose 4.64 cents, or 1.6 percent, yesterday to settle at $2.9103 a gallon in New York. Futures reached a record $3.631 a gallon on July 11.

Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.3 cents to $3.717 a gallon, the AAA said yesterday on its Web site. Prices reached a record $4.114 a gallon on July 17.

Mitigated Impact

``The drop in gasoline supplies was quite large, but any impact on the market will be mitigated somewhat because it's the middle of August and summer driving season is almost over,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts.

Gasoline demand in the U.S. peaks during the summer, when Americans take to the highways for vacations. The so-called driving season lasts from the Memorial Day weekend in late May to Labor Day in early September.

U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 3 percent from a year earlier, the department said. Gasoline consumption averaged 9.46 million barrels a day over the period, down 1.6 percent.

Refineries operated at 85.7 percent of capacity in the week ended Aug. 15, down 0.2 percentage point from the week before and the lowest since the week ended May 2, the report showed.

Brent crude oil for October settlement rose $1.11, or 1 percent, to settle at $114.36 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.