Oil jumps 6 percent on U.S. gasoline stock draw

By @ibtimes on

Oil prices jumped 6 percent to above $42 a barrel on Wednesday, after a U.S. government report showed a sharp drop in gasoline inventories in the world's top consumer.

U.S. crude rose $2.54 to settle at $42.50 a barrel, while London Brent crude gained $1.79 to settle at $44.29 a barrel.

The drop in gasoline inventories came in data from the U.S. Energy Information Administration that also showed a 1.7 percent rise in demand for the fuel over the four weeks ending February 20.

The big draw is in gasoline. Demand is up and refinery runs are lower than expected. Demand is coming back, said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.

Analysts have said low gasoline prices are beginning to lure U.S. motorists back to the roads, stimulating demand.

U.S. gasoline inventories fell 3.4 million barrels last week, according to the EIA, while crude inventories rose by 700,000 barrels.

The rise in oil prices came despite a drop in equities markets, with European shares hitting a new six-year low. U.S. stocks fell after U.S. President Barack Obama's first address to Congress shed little new light on how he plans to stabilize the economy and shore up banks.

Data showing sales of previously owned U.S. homes plunged in January and prices hit a six-year low also weighed on shares.

Further support for oil prices came from reports this week of high compliance by members of the Organization of the Petroleum Exporting Countries with deep production cuts agreed last year to stem the slide in oil prices.

Venezuelan Finance Minister Ali Rodriguez, a former president of OPEC, said the OPEC nation expected to propose new output cuts when the group next meets in March.

(Reporting by Matthew Robinson, Gene Ramos, and Robert Gibbons in New York, Alex Lawler in London, and Annika Breidthardt in Singapore; Editing by Marguerita Choy)

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