Updated from 1:08 p.m. EDTCrude oil futures remained above $74 a barrel Wednesday after European diplomats referred Iran back to the U.N. Security Council over its refusal to halt uranium enrichment and accept an incentives package. Foreign ministers from the five permanent members of the Security Council and Germany asked the U.N. to intervene in the standoff with Iran on Wednesday. Their decision came on the heels of a meeting Tuesday with Iran that did not produce a breakthrough in the stalled talks. Iran, the world's fourth-largest crude producer, has maintained it will respond to an incentives package in late August. The West had hoped to receive some kind of response from Iran ahead of the Group of Eight meeting in Russia this Saturday. U.S. Secretary of State Condoleezza Rice called Iran's response to the incentives as "disappointing and incomplete," Reuters reported Wednesday. A government report showing surging gasoline demand and plummeting crude supplies also underpinned prices. August crude closed at $74.95 a barrel, up 79 cents, while gasoline added 6 cents to $2.25 a gallon. The two fuels typically trade in tandem during the summer driving season when demand peaks. Stockpiles of gasoline dropped by 400,000 barrels, more than double analysts' expectations, last week as Americans took to the roads during the July Fourth holiday. Inventories stand at 212.7 million barrels, or 0.8% below last year. Gasoline consumption rose 1.7% over the past four weeks, according to the U.S. Energy Department's weekly petroleum update released at 10:30 a.m. EDT Wednesday. Refining capacity, which had been expected to climb to 93.6% last week, instead dropped to 90.5% after an oil spill in Louisiana closed down a major refining center. Refiners operated by Citgo, ConocoPhillips ( COP) and the Calcasieu Refining Co., which together process 765,000 barrels per day, were operating at lower levels last week. Crude inventories plummeted by 6 million barrels as imports fell and crude was refined into gasoline. The drop caught analysts unawares as they expected a drop of 1.2 million barrels. Distillates, a category that includes heating oil and jet fuel, jumped by 2.6 million barrels thanks to lower demand, higher production and imports. On Nymex, heating oil inched up 1 cent to $2.01 a gallon. Forecasts of hotter-than-average weather for much of the country over the next two weeks boosted natural gas prices by 14 cents to $5.78 per million British thermal units. Utilities use natural gas to generate electricity used to cool homes and offices. Later this week, temperatures are expected to top 90 degrees in the Northeast and Midwest. This year, oil prices are up 23% on actual or perceived threats to global oil supplies. In Nigeria, rebels have attacked the country's oil industry and driven down production by 20%, while fears abound that Iran, the world's fourth-largest crude producer, might cut exports to the West. "Potential threats to supply continue to percolate and there seems to be little resistance to higher and higher prices," said John Kilduff, an analyst at Fimat USA in New York. The formal opening of a 1,100-mile pipeline stretching from Azerbaijan to Turkey on Thursday was one bright spot in the midst of disruptions to the world's oil supplies. The $9.3 billion pipeline, under construction for nearly a decade, is projected to carry up to 1 million barrels of oil per day within two years, the Associated Press reported. At the moment, 430,000 barrels are flowing through the pipeline, much of it destined for European markets. While initially derided as extravagant, the pipeline will help diversify the world's sources of oil. Thus far this year, high crude prices have shaved consumption and world oil demand growth to 1.21 million barrels per day, according to the International Energy Agency. The Paris-based energy adviser projected demand would recover next year and the world would need an extra 1.57 million barrels per day. However, new supplies from countries outside of OPEC should help relieve demand. The Organization of the Petroleum Exporting Countries, which accounts for 40% of the world's crude, has scrambled to meet demand and spare capacity has fallen to a low of 2 million barrels per day. The world currently consumes around 85 million barrels of crude per day. Equities were mixed, with the Amex Oil Index off 1% and and the Philadelphia Oil Service Index up 1%. Leading the way down among refiners and exploration companies were Marathon Oil ( MRO), Sunoco ( SUN) and BP ( BP). Oil service companies Weatherford International ( WFT), Transocean ( RIG) and Cameron International ( CAM) were gaining the most ground, up 1% to 2%. Investment bank Lehman Brothers rejiggered its ratings on some energy companies based on a long-term price of oil for $50 a barrel. Murphy Oil ( MUR) was downgraded from overweight to equal weight and after falling for much of the day, were climbing 20 cents to $55.85. Hess ( HES) was dipping after the investment bank downgraded its stock from equal weight to underweight. The stock was shrugging off earlier declines and was creeping up 18 cents to $54.96. One bright spot in the ratings shuffle was Petroleo Brasiliero ( PBR) which nabbed an upgrade to equal weight from underweight. But after soaring for most of the session, was down 37 cents to $89.21.