Oil Rises, Gasoline Climbs to a Record, on U.S. Supply Decline

By Mark Shenk / Bloomberg

Crude oil rose above $111 a barrel in New York and gasoline surged to a record after a government report showed that U.S. supplies unexpectedly dropped.

Crude oil inventories fell 3.15 million barrels to 316 million last week, the Energy Department said. A 2.3-million- barrel gain was forecast, according to a Bloomberg News survey. Metals futures also rose as the dollar fell against the euro, and gasoline pump prices reached a record average $3.343 a gallon.

``It looks like this move will accelerate and prices will move toward $115,'' said Tom Bentz, a broker at BNP Paribas in New York. ``This is all part of the big uptrend, and where it stops nobody knows.''

Crude oil for May delivery rose $2.37, or 2.2 percent, to $110.87 a barrel at 11:15 a.m. on the New York Mercantile Exchange. Futures reached $111.43, the highest since March 17, when prices touched a record $111.80 a barrel. Oil is up 80 percent from a year ago.

Gasoline for May delivery climbed 3.9 cents, or 1.4 percent, to $2.7894 a gallon. Futures reached $2.8228, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

U.S. pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 1.2 cents to the record, AAA, the nation's largest motorist organization, said today on its Web site.

Refineries operated at 83 percent of capacity last week, the Energy Department report showed. Plants used 88.4 percent during the same week last year. Refiners operated at 82.2 percent in the week ended March 21, the lowest since October 2005, the department said.

`Supportive'

``The report is supportive across the board,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``I'm surprised gasoline isn't up more because of the larger-than-expected drop in inventories.''

Supplies of gasoline and distillate fuel, including heating oil and diesel, also fell. Gasoline inventories dropped 3.44 million barrels to 221.3 million last week, the report showed. A 3-million-barrel decline was expected.

``Domestic demand isn't great but that's not important,'' said Antoine Halff, head of energy research at New York-based Newedge USA LLC. ``Global demand is still growing and that's what matters.''

Total implied U.S. fuel demand averaged 20.5 million barrels a day in the past four weeks, down 0.4 percent from a year earlier, according to the department. Consumption was down 2.2 percent from a year earlier in the four weeks ended March 21.

Brent crude for May settlement rose $2.04, or 1.9 percent, to $108.38 a barrel on London's ICE Futures Europe exchange. Futures reached a record $108.77 a barrel in intraday trading.

The Energy Department released its weekly report on inventories at 10:30 a.m. in Washington.