Crude Slips as Inventories Rise

Crude stockpiles were slightly higher than expected. June crude lost 94 cents, or 0.9%, to settle at $75.65 a barrel.
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) -- Crude oil futures had another volatile trading session Wednesday when the U.S. energy department said crude oil stockpiles rose more than expected last week, but gasoline inventories saw a surprise drawdown.

Another 1.9 million barrels were added to crude oil stockpiles for the week ending May 7, the Energy Information Administration said Wednesday. Analysts surveyed by Platts had been expecting a buildup of 1.7 million barrels. Distillate inventories, too, rose by a larger-than-expected 1.4 million barrels, outpacing estimates for a 1.28 million barrel build.

But in an upside surprise, gasoline stocks declined by 2.8 million barrels last week. Those same analysts surveyed by Platts had been calling for stockpiles to rise by 850,000 barrels.

Jeff Mower, editor-in-chief of the Platts Oilgram Stocks Report said refinery runs declined but crude oil imports remained steady, dropping by 264,000 barrels a day to 9.687 million barrels per day, which was still close to last week's year-to-date high of 9.951 million barrels a day.

"The steady flow of imports can likely be attributed to not only higher refinery demand, but to a wide New York Mercantile Exchange light sweet crude contango, which has created the incentive to store barrels," Mower said. Contango occurs when near-term delivery contracts are cheaper than later-delivery contracts.

The June delivery crude contract was trading higher soon after the report's release, but finished the session 72 cents lower, or down by 0.9%, to settle at $75.65 a barrel. Much like Tuesday's session, June crude prices appeared to be on a roller coaster, touching an intraday high of $77 a barrel and hitting a low of $74.91 a barrel.

The June gasoline contract, meanwhile, rose by 2 cents, or 0.7%, to settle at $4.28 a gallon, and June heating oil also gained 2 cents, or 0.9%, to settle at $2.16 a gallon.

Oil prices felt pressure early in the session as the International Energy Agency trimmed its global oil demand outlook for 2010.

Oil-related equities, however, soared alongside the broader market.

Stocks, led by the tech sector, spent the day trading comfortably in positive territory and closed near session highs. The NYSE Arca Oil index rose 1.1%, and the Philadelphia Oil Service Sector index jumped 1.7%. Dow components

Exxon Mobil

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(CVX) - Get Report

finished modestly higher, by 0.7% and 0.5%, respectively.

In another attempt to contain the burgeoning oil spill in the Gulf of Mexico,


(BP) - Get Report

moved a containment unit, or so-called "top hat," into place on the ocean floor in an effort to channel freed oil to an awaiting ship,


reported. On Tuesday, Capitol Hill lawmakers flogged executives from BP,


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over their response and evasive accountability for the oil slick. BP's stock, which was one of the sector's handful of weak spots, finished down by 0.5%.

The Wall Street Journal

reported the White House is putting together legislation that would hike taxes on each barrel of oil produced by one cent to pay for costs from oil spills. A separate report from


also said proposed legislation would raise the liability cap on oil firms following disasters, and could affect BP retroactively.

Elsewhere on the Nymex, the June natural gas contract added 15 cents, or 3.7%, to settle at $4.28 per million British thermal units. On Thursday morning, the EIA, releases storage data for the week ended May 7. Surveyed analysts believe storage levels rose between 100 to 104 billion cubic feet, according to Platts.

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