Oil prices increase as stockpiles fall; gas supplies rise

Gas prices are expected to peak near $3.50 a gallon this spring.

NEW YORK (AP) — Oil prices rose Wednesday after a U.S. government report showed crude oil stockpiles fell for the eighth consecutive week but gasoline supplies swelled.

Fears of further violence in Nigeria, the world’s eighth-largest oil producer, also supported prices.

Crude inventories fell by 6.8 million barrels, or 2.3 percent, to 282.8 million barrels during the week ended Jan. 4, the Energy Department’s Energy Information Administration said in its weekly report.

The drop was more than eight times the 800,000 barrels analysts predicted, according to a survey by Dow Jones Newswires. However, gasoline inventories beat expectations, rising sharply by 5.3 million barrels, or 2.6 percent, to 213.1 million barrels. Analysts forecast stockpiles would climb by only 1.6 million barrels last week.

“This was really a mixed report, not a bullish report,” said Tim Evans, an analyst at Citigroup Inc. in New York.

Contributing to the drop in crude oil stocks were efforts by Gulf Coast refineries to minimize their inventories, which are subject to year-end taxes, he said. Crude supplies also tend to rebound early in the year, he said.

“When we have weak gasoline demand, as we do now, and when we have swelling gasoline inventories, as we do now, it’s hard to make the case that the overall petroleum market is critically tight,” Evans said.

Light, sweet crude for February delivery added $1.36 to $97.69 a barrel on the New York Mercantile Exchange.

At the pump, gas prices dipped 0.1 cent overnight to a national average of about $3.10 a gallon Wednesday, but remain well above the year-ago average of $2.30 a gallon, according to AAA and the Oil Price Information Service. The Energy Information Administration on Tuesday said gas prices are expected to average more than $3 a gallon through 2009 and peak near $3.50 this spring.

In London, February Brent crude rose $1.04 to $96.58 a barrel on the ICE Futures exchange.

The weekly report also showed that inventories of distillate fuel, which includes diesel and heating oil, rose by 1.5 million barrels to 128.7 million barrels. Analysts had expected a drop of 300,000 barrels.

Heating oil futures rose by 3.06 cents to $2.6669 a gallon. Natural-gas prices jumped 11.5 cents, selling at $8.082 per 1,000 cubic feet.

U.S. refineries ran at an average 91.3 percent of total capacity, an increase of 1.9 percentage points, beating the expected 0.1 percentage point gain, the report said.

Reports that Nigerian militants are planning attacks on the nation’s oil facilities also sent prices higher. In a research note, Vienna’s PVM Oil Associates noted that the country had “already lost some 15 percent of crude output capacity” because of violence. Still it forecast increased production of around 2.35 million barrels a day for this year, up from last month’s 2.22-million barrel daily output.

A monthly EIA report Tuesday predicted oil supplies will be tight this year but ease in 2009. The EIA predicted oil prices will average $87 a barrel this year, up from a previous estimate of $85. The average price will then fall to $82 a barrel in 2009, it said.