Oil jumps on shrinking gas supply

Oil jumps on shrinking gas supply
Crude gains more than $2.50 as investors digest U.S. inventory report showing drop in gasoline stockpiles.

SINGAPORE (AP) -- Oil prices rose Thursday above $118 a barrel as investors mulled a fall in U.S. gasoline inventories and a possible output tightening by OPEC at its next meeting in September.

U.S. crude for October delivery was up $2.62 at $118.18 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.01 overnight to settle at $115.56 a barrel.

The September contract expired Wednesday after rising 45 cents to $114.98 a barrel.
The price gains came despite a huge rise in U.S. crude inventories. But not all U.S. fuel supplies were abundant.

Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels in the week ended Aug. 15, the U.S. Energy Department's Energy Information Administration said Wednesday. Meanwhile, distillate inventories - which include heating oil and diesel fuel - rose by less than expected, the EIA said.
That was enough to offset a hefty 9.4 million barrel rise in U.S. crude stocks last week when the average analyst forecast had been for a 1.7 million barrel increase, according to energy information provider Platts.

"That report had something for everyone," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "On the one hand, the crude inventory buildup was quite strong, but the gasoline draw was also very prominent."
Investors are also trying to anticipate the outcome of the next Organization of Petroleum Exporting Countries meeting in early September, as supply concerns could rise further if members of the cartel decide to lower their output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.

"The market is looking to the OPEC meeting," Moore said. "Before that meeting, we're going to get quite a few statements from OPEC officials expressing opinions. In the end, I don't expect a production cut, but they may push for greater adherence to output quotas."

Oil prices have rebounded after falling about $35, or nearly a quarter, from their all-time trading record $147.27 on July 11. Many investors expect that high gasoline prices and slowing economic growth in the U.S., Europe and Japan will undermine global energy demand.

Prices were supported Thursday by a slightly weaker dollar compared to the euro. The 15-nation euro traded was up to $1.4775, while the dollar fell to ¥109.62. A falling greenback encourages investors to seek commodities such as oil as a hedge against inflation and a weaker dollar.

In other Nymex trading, heating oil futures rose 3.01 cents to $3.1936 a gallon, while gasoline prices gained 1.84 cents to $2.9287 a gallon. Natural gas futures increased 1.8 cents to $8.095 per 1,000 cubic feet.

CNN