Oil Prices Climb on Inventory Drop

Oil prices surged Wednesday after the Energy Department said U.S. crude inventories unexpectedly fell for the first time in eight weeks.

Supplies declined 2.1 million barrels to 292.2 million in the week ended Friday. Analysts surveyed by Bloomberg News had expected an increase of 2 million barrels. Inventories of gasoline and distillate, which includes diesel and heating oil, also fell. Refineries operated at 89.9% of capacity, an eight-week high.

“This report basically blasts the idea that we would see continued large builds of crude stocks,” said Phil Flynn, market analyst at Alaron Futures & Options in Chicago.

Crude oil for May delivery rose $1.18, or 3.4%, to $36.15 a barrel in New York trading.

It was the biggest single-session increase since a 3.5% gain March 15.

Gasoline inventories fell by 800,000 barrels last week to 200.1 million barrels, 1% lower than a year earlier. Analysts surveyed by Bloomberg News expected an increase of 1 million barrels. Demand rose 5.9% to 9.2 million barrels a day, the highest since the week ended Oct. 31. Gasoline use was 9.4% higher than in the same period a year ago.

Gasoline for May delivery rose 3.9 cents, or 3.6%, to $1.113 a gallon in New York. Gasoline futures are 32% higher than at this time last year.

Although gasoline prices are even higher in California than in most other parts of the nation, the news on gasoline supplies was a bit rosier for the state Wednesday. In a separate report, the California Energy Commission said that gasoline production at the state’s refineries last week rose 7.5% and that gasoline stockpiles gained 6.5%.

On the downside, the commission reported that the state’s gasoline inventories were 17.6% below year-ago levels -- a drop from the prior week’s report, which showed stockpiles were 14.1% below last year’s levels.