Oil climbs after inventory report
July 2nd, 2008 | by admin |By Ben Rooney, CNNMoney.com staff writer. Last Updated: July 2, 2008: 11:16 AM EDT
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NEW YORK (CNNMoney.com) — Oil prices rallied Wednesday after the government reported that the nation’s crude supplies fell slightly more than expected last week while stockpiles of gasoline unexpectedly rose.
Light, sweet crude for August delivery was up $1.53 to $142.50 a barrel on the New York Mercantile Exchange. Oil was up 93 cents at $141.90 just before the report was released.
The August contract hit an all-time trading high of $143.67 a barrel on Monday, and a settlement record of $140.97 Tuesday.
In its weekly inventory report, the Energy Information Administration said crude stocks fell by 2 million barrels last week. Analysts were looking for a drop of 1.2 million barrels according to a poll by energy research firm Platts.
Distillates, used to make diesel fuel, jet fuel and heating oil, rose by 1.3 million barrels while gasoline supplies rose by 2.1 million barrels. Analysts were looking for an increase of 2.4 million barrels in distillates supplies and a decline of 500,000 barrels in gasoline stockpiles.
Meanwhile, the oil market continued to digest Tuesday’s report from the International Energy Agency predicting tight oil supplies worldwide despite soaring prices and falling demand in the U.S. and Europe.
Traders also geared up for the European Central Bank’s decision on interest rates and the U.S. government’s report on the labor market, both due Thursday.
The oil market continued to consider geopolitical issues, including tensions in the Middle East and Nigeria, as sources of potential supply disruption.
ECB Oil traders centered on the European Central Bank, which was widely expected to announce an interest rate hike Thursday.
An interest rate hike in the euro zone could strengthen the 15-nation euro and hurt the dollar.
Many analysts said the dollar’s decline is largely to blame for high oil prices.
In addition to the stronger euro, the dollar has also been undermined by weakness in the U.S. economy.
Jobs Oil traders will be looking for signs of the economy’s health on Thursday when the Labor Department reports on non-farm payrolls and the nation’s unemployment rate in June.
Economists expected the report to show that payrolls shrank by 60,000 in June and that the unemployment rate eased to 5.4% from 5.5% in May.
Geopolitics Ongoing tensions between Israel and Iran over potential attacks on the Islamic republic’s nuclear facilities also influenced the oil market.
There is a perception in the market that "it’s just a matter of time" before the two nations clash, Beutel said.
Over the weekend, the commander of Iran’s Revolutionary Guards warned that Tehran would respond to an attack by barraging Israel with missiles and could seize control of a key oil passageway in the Persian Gulf, the Strait of Hormuz.
That sentiment was echoed Wednesday by Iran’s oil minister who said that an attack on his country would provoke a fierce response, the Associated Press reported.
Minister Gholam Hossein Nozari said, however, that Tehran would not cut oil deliveries and would continue supplying the market even if struck by Israel or the United States, according to the AP.
Nigeria, Africa’s largest crude producer, has also been a source of concern for the oil market recently.
Labor disputes and attacks on oil installations by militant groups have cut Nigeria’s production to its lowest level in nearly two decades.
Gas Retail gas and diesel prices rose overnight, with gas hitting a new record high.
The national average price for a gallon of regular gas rose 0.5 cent overnight to $4.092, a daily survey by motorist group AAA showed.
The survey also showed that the national average price for diesel fuel rose to $4.767 from $4.762 the day before. 
First Published: July 2, 2008: 9:25 AM EDT
