-- API data shows surprise drop in U.S. gasoline stocks
-- Market awaits EIA stocks data for confirmation
-- Gasoline demand lags year-ago by 4.6% - SpendingPulse
By David Bird
NEW YORK (Dow Jones)--Crude oil futures prices were trading higher Wednesday after an industry report showed U.S. petroleum products inventories declined more than expected in the latest week.
The American Petroleum Institute, an industry trade association, said late Tuesday afternoon that gasoline stocks dropped 5.374 million barrels in the week ended Aug. 12, well beyond analysts' expectations of a 1.2-million-barrel decline. Distillate stocks, the grouping for diesel fuel and heating oil, fell 1.293 million barrels, against expectations of a 500,000-barrel rise. Crude oil stocks rose 1.745 million barrels in the week, the API said, while a 600,000-barrel decline was expected.
Traders will be closely watching for a confirmation of the API data from the federal Energy Information Administration's report for the same period. The EIA report is due for release at 10:30 a.m. EDT.
Responding to the API data, crude oil futures rose to $88.67 a barrel, their highest intraday level since Aug. 4, after efforts to top $88 a barrel fell short during Tuesday's trading session. Light, sweet crude oil futures for September delivery on the New York Mercantile Exchange were up $1.70 a barrel at $88.35 a barrel. ICE North Sea Brent crude for October was up $2.23 a barrel, at $111.36 a barrel.
News that U.S. July producer prices rose 0.2%, compared with forecasts of a 0.1% rise, didn't slow oil's ascent, despite concerns that rising inflation could hamper the Federal Reserve's moves to keep interest rates low. Core inflation--excluding food and energy costs--was up for an eighth straight month, rising 0.4% against expectations of a 0.2% increase.
Gasoline futures prices posted the biggest rise early Wednesday, responding to lower inventories, but traders said the gain may be a last gasp of a dismal summer season.
Latest figures from MasterCard's SpendingPulse report show U.S. gasoline demand continued to be stuck in reverse in what should be the peak driving season. With retail prices holding at nearly one-third higher than a year ago, gasoline demand plunged 4.6%, or nearly 450,000 barrels a day, from a year ago in the week ended Aug. 12. That's the biggest year-on-year drop in two years.
"While it's possible that gasoline stocks may have fallen sharply with refiners and import terminals rushing some inventory out of the door before driving season ends, without stronger end-use consumption, this just shifts the inventory problem to the retail level," said Tim Evans, analyst Citi Futures Perspective.
September reformulated gasoline blendstock futures were 6.46 cents higher, at $2.9184 a gallon. September heating oil futures were up 5.97 cents at $2.9923 a gallon.
-By David Bird, Dow Jones Newswires; 212-416-2141; david.bird@dowjones.com
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