Oil Slumps on Supply Jump

NEW YORK (TheStreet) -- A surprise surge in crude oil inventories dealt a swift punch to prices on Wednesday, which managed to recover some ground to close mildly weaker on Wednesday.

For the week ended July 23, crude oil supplies rose by a surprising 7.3 million barrels, the Energy Information Administration said. Analysts polled by Platts had believed oil supplies would instead drop by 2.3 million barrels. The government assessment also far outpaced statistics released by the American Petroleum Institute late Tuesday, which estimated oil stockpiles rose by 3.08 million barrels last week.

Linda Rafield, a senior oil analyst at Platts, said the swift supply spike "appeared to be a bunching of cargoes that suddenly landed, a not unusual occurrence at this time of year given hurricanes and tropical storms."

The EIA also said last week's gasoline inventories grew by 100,000 barrels, which was better than the expected 1.1 million barrel buildup. Distillate fuel stocks, too, rose by a lighter-than-expected 900,000 barrels, landing well below forecasts for a 1.8 million barrel increase.

The September delivery crude oil contract on the Nymex fell to a session low of $75.90 a barrel, but since pared losses to settle just 51 cents, or 0.7% lower, at $76.99 a barrel. September heating oil settled 0.2% lower at $2.03 a gallon and September gasoline slipped 0.03%, to settle at $2.07 a gallon.

Shares of ConocoPhillips(COP) finished a penny higher at $54.45, after beating analysts' estimates with earnings of $1.67 a share. ConocoPhillips also said it was selling a 7.6% stake in Lukoil back to the Russian conglomerate.

A 2% increase in oil and gas production and a trimmed loss in its downstream segment, among other factors, helped Hess(HES) top second-quarter earnings projections as it posted a profit of $1.15 a share. The stock, however, ended the session off by 80 cents, or 1.5%, at $52.50.

Dow Jones Industrial Average component Exxon Mobil(XOM), which is scheduled to report quarterly earnings of $1.46 a share on Thursday morning, gained 0.2% on Wednesday. Shares of fellow blue-chip Chevron(CVX), which is due to report Friday, lost 0.3%.

Oil-related stocks dropped broadly along with the major market averages, as the NYSE Arca Oil index fell 0.9%, and the Philadelphia Oil Service index lost 0.7%.

Elsewhere, the September natural gas contract gained 7 cents, or 1.5%, to settle at $4.72 per million British thermal units ahead of its own inventory report. The EIA will offer its assessment on weekly storage levels on Thursday morning, with a Platts projection calling for a net injection between 31 billion to 35 billion cubic feet.

--Written by Sung Moss and Melinda Peer in New York.

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