Oil dips below $77 as US crude supplies rise

[July 14, 2010]  LONDON (AP) -- Oil prices dropped below $77 a barrel Wednesday after a report showed U.S. crude supplies rose unexpectedly last week, suggesting demand remains lackluster.

Benchmark crude for August delivery was down 38 cents to $76.77 a barrel at midday London time in electronic trading on the New York Mercantile Exchange. On Tuesday the contract gained $2.20 to settle at $77.15.

Crude inventories rose 1.7 million barrels last week, the American Petroleum Institute said late Tuesday, against a drop of 2.6 million barrels forecast in an analyst survey by Platts, the energy information arm of McGraw-Hill Cos.

Inventories of gasoline and distillates also rose, the API said.

A strong start to second-quarter U.S. corporate earnings reports had helped buoy oil prices this week. Profits by Alcoa Inc. and Intel Corp. have beat analyst estimates. Google Inc., JPMorgan Chase & Co., and Bank of America Corp. are scheduled to announce earnings later this week.

"Economic guidance should continue to rule in moving oil prices," Ritterbusch and Associates said in a report. "This difficult trading environment is likely to continue for at least a couple more months with trading confined to the spring-summer range of about $70 to $80."

Analysts at Commerzbank Corporates & Markets attributed last week's 7 million-barrel decrease in oil supplies to Hurricane Alex, which temporarily impaired oil production in the Gulf of Mexico. The International Energy Agency expects the demand for oil to increase 1.77 million barrels per day for 2010 and 1.35 million barrels per day for 2011.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

In other Nymex trading in August contracts, heating oil fell 0.71 cent to $2.0403 a gallon, gasoline dropped 0.54 cent to $2.0830 a gallon and natural gas fell .6 cent to $4.348 per 1,000 cubic feet.

Brent crude was down 19 cents to $76.49 a barrel on the ICE futures exchange.

[Associated Press; By NATALIE RAGUS]

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