Oil Prices Climb Despite Rising Gas Stocks

WASHINGTON – Crude oil futures resumed their upward march Wednesday, but a reported surge in U.S. inventories of gasoline and heating oil send prices for those refined products lower.

The Energy Department said domestic supplies of gasoline grew by 4.5 million barrels last week and that supplies of distillate fuel, which include heating oil and diesel, increased by 4.9 million barrels.

The agency’s weekly report also showed that U.S. demand has held firm over the past month in the face of high prices, and that comforted the market’s bulls, who have been pushing crude futures higher out of a conviction that global supplies are tight and economic growth will cause energy consumption to rise.

Moreover, the threat of instability in the oil-rich Middle East raised market jitters this week after Iran said Tuesday it would allow work at its nuclear research facilities to resume despite warnings from Western countries.

Oil broker Mike Fitzpatrick of Fimat USA in New York said the bullish sentiment among hedge funds and other investors is so strong that “you would have to see a clear, unambiguous contraction in economic activity” in order for energy prices to fall by any significant amount.

Light sweet crude for February delivery climbed 57 cents to settle at $63.94 a barrel on the New York Mercantile Exchange.

Gasoline futures fell by 0.4 cent to settle at $1.7331 a gallon on Nymex, where heating oil futures retreated 1.08 cent to close at $1.7271 per gallon.

With above normal temperatures in parts of the U.S., natural gas futures fell 9.8 cents to settle at $9.238 per 1,000 cubic feet.

Last week’s slide in U.S. gasoline inventories left supplies at 208.8 million barrels, or 4 percent below year ago levels. The drop in distillates left inventories at 133.8 million barrels, or almost 7 percent more than last year.

Also on Wednesday, China’s planning agency said the country’s economy will slow to a still sizzling growth rate of 8.5 percent to 9 percent this year.

With strong global demand and a thin supply cushion, every output disruption – and every potential threat to disruption – has been sending prices higher.

“The current Iranian developments, though they will not cause any immediate disruption to oil supply, have caused some anxiety on the part of traders,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Iran, a major oil producer, said its action was to prepare for fuel research only and that it was not resuming work to produce nuclear weapons.

The U.S. and Britain said Wednesday that Western countries will likely seek economic sanctions against Iran after it restarted nuclear activity. Iran’s president said his country would not be “bullied” and would push ahead with the program.

In its weekly petroleum report, the Energy Department said commercial inventories of crude oil fell by 2.9 million barrels to 318.7 million barrels, or 11 percent above year ago levels.