Updated from 10:57 a.m. EDTOil prices edged higher Wednesday after a government report showed domestic gasoline supplies plummeted last week. Light, sweet crude climbed 19 cents to $73.94 a barrel on Nymex. The contract shed $1.30 a barrel on Tuesday as optimism grew that peace talks over Lebanon would bear fruit. Wholesale gasoline prices tacked on 1 cent to $2.29 a gallon, helped in part by refinery outages across the country. Gasoline supplies tumbled by 3.2 million barrel to 211 million barrels as rising demand canceled out high levels of imports and production, according to the U.S. Energy Department's weekly inventory update. Over the past four weeks, demand averaged 1.8% above last year. The decline overshot analysts predictions of no change in a Bloomberg poll. Still, supplies remain slightly above last year. The summer is a peak season for gasoline use as millions of Americans take to the roads, and a spate of refinery outages has hammered supplies. Valero Energy ( VLO) and ConocoPhillips ( COP) have lowered production at their refineries in Tennessee, Missouri and Louisiana while they undergo repairs. Crude, which is processed into distillates and gasoline, was unchanged at 335.5 million barrels, or nearly 4% above last year. Refining capacity dropped from 92.9% to 92.5%. Inventories of distillates, a category that includes diesel and jet fuel climbed by 800,000 barrels, and are now more than 3% over last year's levels. Heating oil added 1 cent to $1.95 a gallon. Natural gas increased 47 cents to $6.88 per million British thermal units as some utilities switched to cheaper natural gas. Prices were climbing despite a projected jump of 25 billion cubic feet in domestic supplies last week, according to a Bloomberg poll. At 2.7 trillion cubic feet, stockpiles are currently 18% above last year. Earlier in the session, oil futures were little changed as diplomats met to discuss Mideast violence. Supporting prices was a vow from a Nigerian rebel group to step up violence against oil companies, Bloomberg reported. In Rome Wednesday, U.S. Secretary of State Condoleezza Rice was meeting with U.N. Secretary General Kofi Annan and Lebanese prime minister Fuad Saniora in an effort to hammer out terms of a ceasefire between Israel and Hezbollah. The diplomats agreed on deploying a peacekeeping force along the border between Lebanon and Israel, but stopped short of calling for an immediate truce to the fighting, which has killed more than 400 people. Meanwhile, Israel continued its air strikes on Lebanon and promised to occupy the southern portion of the country until a peacekeeping force replaces them. Oil prices are up 21% this year thanks to fighting in the Middle East, militant attacks in Nigeria and soaring demand in Asia and the U.S. In Nigeria, rebels attacked an oil flow station operated by Eni ( E) in the Niger Delta last night. Although Agip, the parent company of Eni, did not release production figures, Reuters reported the Italian oil company typically exports 200,000 barrels from the area. This was the second attack in two weeks on Eni's Nigerian oil installations by rebels intent on gaining a share of the country's oil revenue. Two days ago, Royal Dutch Shell ( RDS-A) reported a pipeline leak that shaved its output by 180,000 barrels a day, boosting the company's total daily production loss in Nigeria to 653,000 barrels. Oil and natural gas companies have been reporting stellar earnings, with an average doubling of profits during the second quarter, on the back of high refining margins and energy prices. Refining margins were high because of a government mandated switch to ethanol in gasoline and heavy maintenance work required for the change. ConocoPhillips, which released its earnings today, was no different. Profits skyrocketed 65% to $5.19 billion, or $3.09 per share, while revenue jumped 13% to $47.1 billion. Conoco's production increased to an average of 2.13 million barrels of oil equivalent per day, up from 1.54 million barrels during the same quarter last year. The jump in output was due to the acquisition of Burlington Resources and initial production in Libya. High oil and gasoline prices masked some companies lagging production, which dropped during the quarter. Although BP's ( BP) output inched down less than 1%, the oil giant still managed a 30% rise in profits to $7.3 billion. Higher capital costs took a bite out of BP's profits, like many oil companies. "As the price goes up, we're not getting dollar for dollar to the bottom line because we get higher taxes with higher prices, and of course higher prices also bring on additional inflation in the supply chain," said Lord John Browne, BP's chief executive, in a conference call. At Hess ( HES), production shrank by 1,000 barrels of oil equivalent per day to 354,000 barrels and is expected to shrink further this year as production sharing agreements and oil field sales shave output. In 2006, the New York oil company expects to produce 360,000 to 370,000 barrels of oil equivalent per day. During a conference call, John Rielly, Hess' chief financial officer, said production sharing agreements had cost the company around 3,000 barrels of oil equivalent per day. When oil companies drill overseas, they often enter contracts that require them to give a certain percentage of their output to the host country. With oil prices surging, many of those countries have renegotiated the agreements and demanded a larger cut. But higher oil prices likely won't reduce output further. "Even if it goes up to $80, it won't be a big number," Rielly said Wednesday. Despite the drop, profits leapt 89% to $565 million, or $1.79, in the second quarter, and revenue climbed 36% to $6.9 billion. Taking out a $50 gain on sales of gulf properties and $18 million in office closing costs, Hess made $1.69 a share. But it still wasn't enough for Wall Street analysts who had been looking for earnings of $1.80 a share. This morning, Deutsche Bank downgraded the stock to hold from buy and the company's shares took a beating early in the session, but eventually rebounded 0.3% to $53.46. On Thursday, Shell and ExxonMobil ( XOM) will release their results, and Chevron ( CVX) will follow on Friday.