Gasoline Rises to Two-Month High After Unexpected Supply Drop

Gasoline rose to its highest price since May after a government report showed U.S. inventories unexpectedly declined last week.

Futures gained 1.7 percent after Energy Department data showed total gasoline supplies fell 840,000 barrels in the week ended July 8 to 211.7 million barrels. Analysts estimated that stockpiles of the fuel increased 500,000 barrels, according to a Bloomberg News survey. Crude oil stockpiles shrank 3.12 million barrels.

“We got quite a shot in the arm with draw in crude and gasoline supplies,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “That was a surprise for the market.”

Gasoline for August delivery rose 5.34 cents to settle at $3.1516 a gallon on the New York Mercantile Exchange, the highest settlement since May 10.

Inventories of the fuel increased 0.8 percent on the East Coast and 0.7 percent in the Gulf Coast, with stocks in other U.S. regions decreasing, lead by a 2.9 percent drop on the West Coast.

Regular gasoline at the pump increased 0.9 cent to $3.645 a gallon yesterday, the eighth consecutive increase, according to AAA data. The price has gained 8.3 cents since July 4.

Distillate Supply

Distillate inventories increased more than analysts forecast, rising 2.97 million barrels last week to 145 million barrels, the government said. The survey called for an increase of 500,000 barrels.

“We should be seeing more stock builds like this at this type of year,” said Andrew Reed, a diesel analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. “The fact that we haven’t speaks to the strength of exports.”

Heating oil for August delivery gained 1.21 cents, or 0.4 percent, to $3.0997 a gallon on the exchange.

Demand for heating, trucking and industrial fuels sank 11 percent last week, the most since November, and on a four-week average was 5.2 percent below a year earlier, department data showed.

Distillate stocks rose on weakness in demand, which “appears in line with recent economic indicators showing a significant slowdown in U.S. economic activity” in the second quarter, Christophe Barret, a London-based oil analyst at Credit Agricole SA, said in a note to clients today.

Federal Reserve

Prices also rose as Federal Reserve Chairman Ben S. Bernanke told Congress the central bank is prepared to take additional action if the economy appears to be in danger of stalling.

“The idea that interest rates are probably going to be kept low” is giving strength to products, Cordier said. The message from the Bernanke testimony is that the Fed will come to the rescue, he said.

Bernanke’s comments are his first since a government report on July 8 showed the economy added 18,000 jobs in June, less than the most pessimistic forecast in a Bloomberg News survey of economists.

Oil consumption in North America will rise by 150,000 barrels a day and European use will decline, the Organization of Petroleum Exporting Countries said yesterday in its first forecast for next year.

“We expect that processing by refiners will increase as Midwest plants come back from unscheduled outages,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. OPEC reducing the world growth forecast “might also be putting some pressure” on the fuel.

OPEC said oil demand will increase by 1.3 million barrels a day next year, compared with 1.4 million this year.

“An unsteady world economy is negatively affecting the oil market and imposing a high range of uncertainty for the short term,” OPEC’s Vienna-based secretariat said in its monthly report.

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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