Oil Prices Rise Before US Inventory Data
Thursday, 03 April 2008

AP, VIENNA, Austria-- Oil prices rose Wednesday as traders awaited U.S. fuel supply data expected to show crude oil inventories rose last week while gasoline stockpiles dropped.

The U.S. Energy Department's weekly petroleum supply snapshot due later Wednesday ''will be important to the direction of the oil market particularly with the oil price having softened somewhat,'' said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. ''A large build in crude or gasoline might weigh on oil prices.''

Gasoline and distillate figures can also drive the market. Last week, oil prices surged by $4 a barrel partly on a weekly report by the U.S. Energy Information Administration that showed gasoline and distillate stocks dropped much more than forecast.

The inventory report stoked worries that stockpiles of gasoline in particular are falling at a time when analysts would like to see them rising in advance of peak summer driving season Soma analysts, however, feel that falling demand could soon reverse the trend. ''Gasoline at the pump is averaging $3.116 a gallon since the start of the year as opposed to $2.351 a year ago,'' wrote Stephen Schork, in the Schork Report.

''Accordingly, demand is falling.'' Analysts expected this week's data to show crude oil inventories grew 2.3 million barrels for the week ended March 28, according to a Dow Jones Newswires survey. Gasoline inventories were forecast to have fallen 2 million barrels, while distillate stocks, which include heating oil and diesel fuel, were expected to fall 1.7 million barrels, the survey showed.

Light, sweet crude for May delivery rose 80 cents to $101.78 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Investors were also watching the movement of the U.S. dollar, which rose Tuesday, helping to push the oil contract down 60 cents to settle at $100.98 a barrel.

Investors who previously bought commodities such as oil as a haven against inflation and a falling dollar sold as the greenback strengthened against the euro and other currencies. A stronger dollar also makes oil more expensive to overseas investors. Many analysts say oil investors have taken most of their price cues in recent months from gyrations in the dollar.

But the choppy trading in Tuesday's floor session reflected a debate among investors over oil's future direction. Many analysts believe dollar-induced buying has driven oil prices far beyond levels that can be justified by supply and demand or economic conditions. The second quarter of the year, which began Tuesday, typically sees the lowest petroleum demand.

The country's appetite for oil and gasoline have fallen sharply since January, and oil supplies have mostly risen in recent weeks. Other investors see continued strong demand for oil and fuel from China and India as a sign that oil prices have further to rise, despite demand and supply dynamics in the U.S.

In other Nymex trading, heating oil futures rose nearly 4 cents to $2.9161 a gallon while gasoline prices added more than 2 cents to $2.6610 a gallon. Natural gas futures slipped more than 9 cents to $9.631 per 1,000 cubic feet. In London, Brent crude futures rose 88 cents to $101.05 a barrel on the ICE Futures exchange.

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