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Oil Rises on Surprise Inventories Drop

The release of the Energy Intelligence Agency's weekly data help boost oil's price.

The Energy Intelligence Agency Wednesday reported a surprise drop in crude inventories for the week ending Aug. 8, and crude markets are moving higher at the New York Mercantile Exchange on the news.

West Texas crude for September delivery was recently adding $2.99 at $116.00 a barrel, and Brent crude was gaining $2.30 at $113.45 a barrel. Reformulated gasoline is edging 5 cents higher at $2.89 a gallon, Heating Oil is also up 5 cents at $3.12 a gallon, and near-term natural gas is 16 cents lower at $8.16 per million British thermal units.

Today's EIA report predict that commercial crude oil inventories dropped 400,000 barrels from the previous week -- which was in line with what most analysts were forecasting. However, total U.S. motor gasoline inventories fell by 6.4 million barrels during the week, distillate stores fell 1.7 million barrels, and propane inventories rose by 2 million barrels. This brought total commercial petroleum inventories down 5.4 million barrels during the week.

The decline in total petroleum inventories was mostly caused by two factors. Oil imports during the week were said to be down by more than 500,000 barrels a day from the prior week, and refinery capacity plummeted to 85.9% from 87% a week earlier.

With recent consumption levels for motor gasoline, jet fuel and distillates all falling sharply, and with the EIA consistently revising its predictions on energy consumption levels to the downside, refiners don't have much of an urge to run their plants at high levels in the current environment. They are also trying to buy as little oil as possible from abroad to cut their costs. These factors are likely what brought petroleum product inventories down so much from the week before.

Meanwhile, oil stocks were mostly trading higher, with

Chevron

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adding 1.9% at $85.11,

ConocoPhillips

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climbing 2% at $81.59, and

Exxon Mobil

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trading up 1.5% at $78.03.

BP

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, however, was falling 1.2% at $59.44.

The

U.S. Oil Fund

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, an exchange-traded fund that closely tracks the performance of WTI futures contracts, was recently gaining 2.1% at $93.52.