NATION Oil prices rise; price of gas expected to hit 2.75

One observer expects gasoline prices to continue to rise.
NEW YORK (AP) -- Crude oil prices edged higher Wednesday after the U.S. government said gasoline inventories dropped for the sixth straight week, keeping worries alive that supplies will be tight going into the peak driving season.
Gasoline prices slipped, though, as the government report showed that U.S. refineries ramped up production last week and that crude imports rose -- indicating that it's possible for supplies to catch up before summer demand is in full swing.
Though crude prices have been fairly stable in recent months, gasoline prices have been surging amid low inventories and refinery outages. At the retail level, U.S. pump prices have risen about 19 percent over the past two months.
"We've gone awfully far awfully fast, and it does look like refineries are coming back," said Peter Beutel of Cameron Hanover. "I don't think that strength in gasoline [prices] is over, but the reasons for it are showing a glimmer of hope that they're dissipating."
Light, sweet crude for May delivery gained 36 cents to settle at 59.61 a barrel on the New York Mercantile Exchange, even though U.S. crude inventories rose by 4 million barrels.
April prices
Gasoline futures for April slid 0.72 cent to settle at 1.9349 a gallon.
The price movements appeared counterintuitive, with crude rising despite surging inventories and gasoline creeping lower despite falling inventories. But analysts said crude futures were catching up to the gasoline market, while gasoline futures were easing back after a big run-up brought them briefly above a six-month high Tuesday.
Refineries operated at 86.3 percent capacity last week, up 0.7 percent from the prior week, but gasoline stocks fell by 3.4 million barrels to 210.5 million barrels, the EIA said. Analysts surveyed by Dow Jones Newswires estimated a smaller decline of 1.6 million barrels.
It's not atypical for refineries to lose inventory this time of year as they perform seasonal maintenance, said Jim Ritterbusch, president of Ritterbusch & amp; Associates in Galena, Ill. Gasoline inventories are in the upper half of their average range but 3.4 percent below their year-ago levels. Motor gasoline demand has been outpacing last year's demand by about 2 percent, the EIA report said.
What's expected
"We're seeing the beginning of a rebound in post-maintenance refinery activity, but we have a long ways to go," Ritterbusch said, adding that he expects the average national retail gasoline price to rise to about 2.75 a gallon in the coming weeks.
The average U.S. price of a gallon of regular gasoline was 2.564 on Wednesday, according to AAA. That's up about 30 cents from a month ago and about 6 cents higher than the same time a year ago.
"With this additional draw in gasoline, we're going to remain sensitized to any refinery problem that comes along," Ritterbusch said. "That will be the main feature in the market for the next couple weeks: When you have gasoline supplies this low, any refinery glitch at all tends to be magnified."
The London-based Center for Global Energy Studies, an international energy group, has warned that oil prices will spike in the summer if the Organization of Petroleum Exporting Countries does not increase output. In a report released Monday, it urged OPEC to raise output so refiners have enough crude.