Oil Above $106 After Overnight Jump

U.S. stockpiles of gasoline and distillates, which include heating oil and diesel fuel, fell more than forecast last week, according to data released Wednesday by the U.S. Energy Department's Energy Information Administration.

The inventory report in particular stoked worries that stockpiles of gasoline are falling right when analysts would like to see them rising in advance of peak summer driving season. Gasoline inventories slid 3.3 million barrels last week, more than four times the decline analysts had expected.

"The gasoline stock movement was probably quite supportive, it's the second week in a row now we've seen a larger than expected drop in U.S. gasoline stocks," said Mark Pervan, a commodity strategist at ANZ Bank in Melbourne, Australia.

Light, sweet crude for May delivery added 57 cents to $106.47 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract rose $4.68 to settle at $105.90 a barrel Wednesday.

The EIA reported that U.S. refinery activity also dropped, which analysts attributed to some refiners cutting gasoline production due to low profit margins. Gasoline inventories are 9 percent higher than a year ago.

"(Gasoline) stock levels are at a higher than normal level, so they've pulled back on production, and this is why we've seen a fairly sharp drop in (refinery) utilization rates," Pervan said.

Valero Energy Corp. cut output at its Corpus Christi, Texas, refinery due to high supplies and falling demand, Dow Jones Newswires reported Wednesday. While gas prices are near records, they have not kept pace with crude's recent rally.

Crude oil inventories, meanwhile, were unchanged. Analysts surveyed by Dow Jones Newswires had expected crude supplies to rise 1.7 million barrels.

Pervan warned that the steadiness in crude oil inventories despite a decline in refinery utilization was an indication that U.S. crude demand was falling, which could lead to a drop in oil futures in the weeks ahead.