Oil rises to near $70 on stocks, US gasoline drop

[May 26, 2010]  SINGAPORE (AP) -- Oil prices rose to near $70 a barrel Wednesday in Asia as a drop in U.S. gasoline supplies and rebounding Asian stock markets bolstered confidence that demand for fuel is rising.

Benchmark crude for July delivery was up $1.13 to $69.88 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract dropped $1.46 to settle at $68.75 on Tuesday.

Gasoline supplies unexpectedly fell last week, dropping by 3.2 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected an increase of 150,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude supplies at the key Cushing, Oklahoma storage terminal fell 772,000 barrels while overall inventories of crude and distillates rose, the API said.

"A draw in stocks at the Cushing, OK hub is potentially a bullish signal for crude oil," energy consultant The Schork Group said in a report.

The Energy Department's Energy Information Administration is scheduled to announce its supply report later Wednesday.

Most major Asian stock markets bounced back Wednesday from losses this week, boosting the optimism of oil traders who often look to equities as a barometer of overall investor confidence.

However, this month's debt crisis in Europe has lowered expectations for the global economy. Bank of America Merrill Lynch cut its forecast for the average oil price in the second half to $78 a barrel from $92 as slower economic growth undermines crude demand.

"Almost all of the (oil demand) growth will be generated in emerging markets while we have sharply reduced our forecasts for the developed world," the bank said in a report.

In other Nymex trading in June contracts, heating oil rose 0.95 cent to $1.8812 a gallon, and gasoline gained 1.97 cents to $1.9505 a gallon. Natural gas jumped 2.1 cents to $4.072 per 1,000 cubic feet.

In London, the Brent crude July contact was up 78 cents to $70.33 on the ICE futures exchange.

[Associated Press; By ALEX KENNEDY]

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