Oil prices rise on big drop in US supplies

AP News
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Posted: Aug 15, 2012 1:07 PM
Oil prices rise on big drop in US supplies

An unexpectedly large drop in U.S. crude oil inventories is pushing up the price of oil.

Benchmark oil rose 21 cents to $93.64 per barrel Wednesday in New York. Brent crude, which is used to price international varieties of oil, rose $.1.06 to $115.09 per barrel in London.

The Energy Department said stockpiles fell 3.7 million barrels last week to 366.2 million barrels. Analysts had predicted a decline of 1.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.

It marked the third consecutive week with a big decrease. Yet, it's not so much a sign of rising demand as of production and seasonal issues. Overall demand for oil and oil products in the U.S. remains week.

Oil production has been affected by a number of issues this month, including some refinery and pipeline problems. Tropical storms have moved through the Gulf of Mexico which closed some oil rigs and slowed oil tankers destined for U.S. ports.

In addition, refiners are selling off inventories to avoid a surplus when they switch to processing winter blends of fuel next month.

"The bigger question is, are these numbers sustainable once these refiners start to come back on line?" Price Futures Group oil analyst Phil Flynn asked.

Although there have been signs of improvement in the U.S. economy, Europe continues to struggle and China still is working to reverse a slowdown in economic growth. Sluggish growth can reduce demand for energy products.

At the pump, the national average for gas rose less than a penny overnight to $3.709 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That's about 31 cents more than a month ago and nearly 12 cents more than a year ago.

Other futures prices on the New York Mercantile Exchange:

— Heating oil rose 3 cents to $3.06 per gallon.

— Gasoline increased 6 cents to $3.06 per gallon.

— Natural gas fell 8 cents to $2.76 per 1,000 cubic feet.