Oil dips to near $77 after surprise US supply jump

[July 28, 2010]  NEW ORLEANS (AP) -- Oil prices dipped to near $77 a barrel Wednesday after a report showed U.S. crude supplies unexpectedly rose last week, suggesting demand remains weak.

By early afternoon in Europe, benchmark crude for September delivery was down 27 cents to $77.23 a barrel in electronic trading on the New York Mercantile Exchange.

Crude inventories jumped 3.1 million barrels last week, the American Petroleum Institute said late Tuesday. Analysts had expected a drop of 2.3 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

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

The Energy Department's Energy Information Administration is scheduled to report its supply data -- the market benchmark -- later Wednesday.

"Tropical Storm Bonnie has so far not had a visible impact on inventories," said a report from Commerzbank in Frankfurt. "Without the production losses in the Gulf of Mexico due to the storm, the increase of inventories would have possibly been even higher."

The contract lost $1.48 to settle at $77.50 on Tuesday on disappointing data about U.S. consumer confidence and manufacturing.

Oil has bounced within the $70s for most of this year, with doubts about the strength of the U.S. economic recovery helping to undermine any move above $80.

"With the price near $80, there would have to be some extreme bullishness to witness a break to the upside," Sander Capital said in a report. "The price of oil should stay in the $75 range for now."

Expectations of a busy hurricane season in the Gulf of Mexico were seen helping to keep a floor under oil prices, even if the EIA were to confirm last week's surprising rise in oil stocks.

"We do not expect a sharp decline given that the energy complex is within a critical time window weather-wise, and prices therefore have the potential to turn on a dime," said Edward Meir at MF Global in New York.

In other Nymex trading in August contracts, heating oil fell 0.26 cent to $1.9968 a gallon, gasoline dropped 0.90 cent to $2.0542 a gallon and natural gas gained 0.7 cent to $4.682 per 1,000 cubic feet.

In London, Brent crude was down 16 cents to $75.97 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.