Oil hits $106 as U.S. fuel supplies fall
NEW YORK (Reuters) - Oil climbed over $106 a barrel on Wednesday after a U.S. government report showed larger-than-expected drops in fuel stocks and declining fuel production in the world's top oil consumer.
U.S. crude oil futures hit a session high of $106.20 and settled at $105.90 a barrel, a $4.68 gain for the day. London Brent added $3.39, settling at $103.99.
Crude oil hit its record high of $111.80 on March 17.
"Today's numbers are a nice bullish surprise and come on a day when the other commodities are picking up as well," said Mike Zarembski, analyst at optionsXpress in Chicago.
Gasoline inventories fell by 3.3 million barrels as U.S. refiners slowed production to the lowest levels since October 2005, when several refineries were knocked offline by hurricanes Katrina and Rita, U.S. Energy Information Administration data showed.
The drop in gasoline stocks was more than triple the 800,000-barrel decline expected. Distillates dropped 2.2 million barrels, also more than forecast.
Crude oil inventories were unchanged last week, which bucked expectations for an increase of 1.7 million barrels.
"Lower-than-expected imports for crude, coupled with a major drop-off in refinery runs, driven by weak crack spreads and maintenance, were the catalyst for lower builds for crude and a much bigger-than-expected drop in gasoline inventories," said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire.
Even before the report, oil rose as a weakening U.S. dollar prompted some investors to shift money back into commodities and a 24-hour strike disrupted operations at French ports.
The dollar slid, boosting oil and other commodities, after data showed new orders for long-lasting U.S.-made manufactured goods unexpectedly fell 1.7 percent during February.
Gold, which like oil is used as a hedge against inflation, hit a one-week high and industrial metals such as copper also gained.
French port and dock workers started the strike at French state-owned ports to protest government plans to privatize the loading activities of seven out of nine of the public ports.
The strike lifted gas oil futures, the benchmark for diesel and heating oil in Europe, traders said. Gas oil was up 4 percent at $945.75 a tonne.
Analysts said a workers' strike in Gabon that had halted 60,000 barrels of daily output from a Shell subsidiary in the West African nation also encouraged oil's gains.
There was also a possibility that Iraq's oil output could be affected by violence in the country's south.
Oil production and exports from the southern oilfields could be disrupted in three days if workers cannot reach their offices due to fighting in Basra, a Southern Oil Company official said.
(Additional reporting by Alex Lawler, Fayen Wong, and Chikafumi Hodo; Editing by David Gregorio)
