NEW YORK ( TheStreet) -- Oil futures pared losses and began trading higher at midday Wednesday after the government reported a surprisingly bullish drawdown in crude stockpiles last week. For the week ending July 9, crude oil inventories fell by 5.1 million barrels, the Energy Information Administration said Wednesday. The reported drawdown was far better than analysts' forecasts, provided by Platts, calling for stockpiles to drop by 2.6 million barrels. The tally was also a far cry from the American Petroleum Institute estimate released late Tuesday showing inventory levels climbing higher by 1.74 million barrels. But the EIA report was mixed, showing fuel stockpiles rising more than expected. Gasoline inventories, which were expected to rise by 950,000 barrels, instead jumped by 1.6 million barrels. Distillates, too, outpaced estimates, swelling by 2.9 million barrels instead of the forecast calling for a 800,000 barrel build. At midday, the August delivery crude contract was trading 74 cents higher at $77.89 a barrel. August gasoline was adding a fraction of a penny at $2.09 a gallon, while the August heating oil contract gaining over 1 cent at $2.06 a gallon. Still, Telvent DTN analyst Darin Newsom was leery of attributing the price jump in oil to the fundamental drawdown, instead pointing to futures' moves corresponding to equities. "Seasonally, we see
crude stocks draw down through mid-September," Newsom said. "What this all says to me is we have a Dow Jones doing its seasonal rally because of earnings, and we have strong investment money going into commodities and that's pulling crude oil higher." As the major stock market averages continued trading modestly higher amid a collage of disappointing retail sales figures and better-than-expected corporate earnings reports from the likes of Intel ( INTC), oil-related stocks traded mixed. The Philadelphia Oil Service Sector index was rising nearly 0.7%, led by a 2.9% jump in shares for Transocean ( TRO). Meanwhile, the NYSE Arca Oil index was down 0.2%, as refiners Sunoco ( SUN) and Valero ( VLO) weighed on the index the most, down 2.6% and 2.3%, respectively. Elsewhere, BP ( BP) put a key well integrity test on hold after installing a new cap on the leaking site in the Gulf of Mexico.
Also on the Nymex, the August natural gas contract was trading flat at $4.35 per million British thermal units. The EIA is expected to report last week's natural gas storage levels on Thursday at 10:30 a.m. EDT. A Platts survey suggested inventories will see a net injection of 78 to 82 billion cubic feet. --Written by Sung Moss in New York