Oil prices steady ahead of U.S. fuel stocks report

The Associated Press ,  Vienna   |  Wed, 04/02/2008 9:11 PM

Oil prices were steady Wednesday as traders weighed the implications of U.S. data to be released later in the day that were expected to show crude stockpiles rose last week while gasoline inventories dropped.

Light, sweet crude for May delivery rose 20 cents to US$101.18 a barrel by afternoon in European electronic trading on the New York Mercantile Exchange.

The U.S. Energy Department's weekly petroleum supply snapshot was expected to offer the oil market some price direction.

"The data will be important to the direction of the oil market particularly with the oil price having softened somewhat," said David Moore, a commodity strategist with the Commonwealth Bank of
Australia in Sydney. "A large build in crude or gasoline might weigh on oil prices."

Still, gasoline and distillate figures also play a role in market movement. Last week, oil prices surged by US$4 a barrel partly on a weekly report by the U.S. Energy Information Administration that showed gasoline and distillate stocks dropped much more than forecast.

The inventory report stoked worries that stockpiles of gasoline in particular are falling at a time when analysts would like to see them rising in advance of peak summer driving season

Some analysts, however, feel that falling demand could soon reverse the trend.

"Gasoline at the pump is averaging $3.116 a gallon (3.8 liters) since the start of the year as opposed to $2.351 a year ago," wrote Stephen Schork, in the Schork Report. "Accordingly, demand is falling."

Analysts expected this week's data to show crude oil inventories grew 2.3 million barrels for the week ended March 28, according to a Dow Jones Newswires survey. Gasoline inventories were forecast to have fallen 2 million barrels, while distillate stocks, which include heating oil and diesel fuel, were expected to fall 1.7 million barrels, the survey showed.

Investors also were watching the movement of the U.S. dollar, which rose Tuesday, helping to push the oil contract down 60 cents to settle at US$100.98 a barrel.

Investors who previously bought commodities such as oil as a haven against inflation and a falling dollar sold as the greenback strengthened against the euro and other currencies. A stronger dollar also makes oil more expensive to overseas investors.

Many analysts say oil investors have taken most of their price cues in recent months from gyrations in the dollar.

But the choppy trading in Tuesday's floor session reflected a debate among investors over oil's future direction. Many analysts believe dollar-induced buying has driven oil prices far beyond
levels that can be justified by supply and demand or economic conditions.

The second quarter of the year, which began Tuesday, typically sees the lowest petroleum demand. The country's appetite for oil and gasoline have fallen sharply since January, and oil supplies have mostly risen in recent weeks.

Other investors see continued strong demand for oil and fuel from China and India as a sign that oil prices have further to rise, despite demand and supply dynamics in the U.S.

In other Nymex trading, heating oil futures rose nearly 2 cents to US$2.8980 a gallon, while gasoline prices added just over a penny to US$2.6504 a gallon. Natural gas futures slipped more than 11 cents to US$9.613 per 1,000 cubic feet.

In London, Bren crude futures rose 20 cents to US$100.37 a barrel on the ICE Futures exchange. (***)

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