Oil prices rise on US gasoline draw, softer dollar

August 18, 2011 | 09:01

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Oil prices climbed on Wednesday, boosted by an unexpectedly big drop in US gasoline inventories during the peak of the key summer driving season and a weaker dollar that helped to spur demand.

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New York's main contract, West Texas Intermediate light sweet crude for September delivery, gained 93 cents a barrel to close at $87.58.

In London, Brent North Sea crude for October delivery jumped $1.47 to settle at $110.60.

The US Department of Energy said Wednesday that American gasoline inventories sank by 3.5 million barrels in the week ending August 12, suggesting stronger-than-expected demand.

A decline of only 1.2 million barrels was expected, according to analysts polled by Dow Jones Newswires.

The drop came as traders particularly focus on US gasoline stockpiles during the summer, when many drivers take to the road for holidays, to gauge the appetite for consumer spending that feeds much of the economy.

Rich Ilczyszyn, at MF Global, said that the gasoline draw was the main engine for the New York market action.

"Demand seems to be still there short term as people go on vacation," he said.

The decline in gasoline reserves helped to offset a large increase in US crude oil inventories last week that could point to weak demand in the world's biggest oil consumer.

Crude reserves soared 4.2 million barrels, confounding market expectations for a drop of 600,000 barrels.

The oil market also found support from a sharp weakening in the dollar against the euro, making dollar-priced commodities more attractive for buyers using stronger currencies.

"Commodity markets in general got a boost from a weaker US dollar and investors are looking for inflation hedges again," BMO Capital Markets analysts said in a client note.

AFP

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