Prices rise by almost $3 on weekly inventory report

Crude oil prices surged today, Wednesday, 13 August, 2008 after the weekly inventory report by the Energy Department showed that crude and crude product supplies declined bigger than expected last week. Crude had shed almost $7 in last four sessions. Crude had lost almost 8% ($10) last week too.

Crude-oil futures for light sweet crude for September delivery closed at $116/barrel (higher by 2.99 or 2.6%) on the New York Mercantile Exchange. Last week, crude prices ended lower by $9.9 (8%). Before that crude lost $15.92 (11%) in July, 2008, the biggest ever in dollars. Prices are 62% higher than a year ago.

EIA reported today that crude supplies fell 316,000 barrels to 296.5 million barrels for the week ended 8 August, 2008. Supplies were expected to rise by 300,000 barrels. Refinery utilization dropped to 85.9% of capacity, from 87% a week earlier.

EIA also reported that motor gasoline supplies fell by 6.4 million barrels to 202.8 million and distillate stocks were down 1.7 million barrels at 131.6 million barrels.

As per demand data, U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.8% from a year earlier. Motor gasoline demand over the past four weeks has averaged 9.4 million barrels per day, down 1.9% from the same time a year ago.

At the currency markets on Wednesday, the U.S. dollar hit the highest since at least March vs. the euro and other major currencies after a report showed U.S. retail sales fell less than forecast in July. The dollar index, which measures the greenback against a basket of currencies, rose to 76.24 from 76.13 in the previous day. The high for the index Wednesday was 76.52.

Earlier this week, the International Energy Agency today reported that tight global oil demand and supply balance, which has helped push up crude prices to record highs, is easing as higher prices and slower economic growth in developed countries is curbing oil demand. Despite that, IEA inched up its 2009 demand estimate for oil products while keeping its 2008 view unchanged. For this year, it estimates oil demand rising 0.9% to 86.9 million barrels of oil a day. For 2009, it estimates rising 1.1% to 87.8 million barrels. In a separate report, the U.S. Energy Department's Information Administration lowered its outlook for oil prices, citing slower demand growth and rising production capacity.

Crude prices had gained 38% in the second quarter of this year. It was the biggest quarterly increase in nine years. It ended June 2008 higher by 9.9%. For the year, crude is up by 19.3% till date.

Brent crude oil for September settlement rose $2.32 cents (2.1%) to settle at $113.47 a barrel on London's ICE Futures Europe exchange.

Against this background, September reformulated gasoline rose 8.9 cents to close at $2.9323 a gallon, and September heating oil gained 5.4 cents to close at $3.1317 a gallon.

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