Oil and Gas Prices Rise on Gas Inventory Drop

Crude oil surged by over $3 a barrel as reports from the U.S. Energy Department showed that the gas inventory fell for the third week.

Gasoline Inventory

Gasoline inventory fell to 224.7 million barrels, a 4.53 million barrel drop last week. That's the largest decrease in the gasoline supply since August.

"The robust supply cushion for gasoline appears to be vanishing before our eyes," said John Kilduff, vice president of risk management at MF Global Ltd. in New York.

May delivery for gasoline rose to $2.7745 a gallon, a 13.53 cent increase. Futures reached as high as $2.7836 a gallon for RBOB, the gasoline mixed with ethanol. That's a intraday record. RBOB started trading in October 2005.

"The gasoline drop was a real eye-opener," said Rick Mueller, director of oil practice at Energy Security Analysis Inc. "Supplies are falling when we aren't even close to the driving season. We should be building stocks ahead of the driving season, not seeing them drop."

Refineries

The report revealed that refineries were running at less capacity than the same week last year, as they operated at 82.2 percent, in contrast to 87 percent during the same period last year.

Inventory for crude oil increased by 7.32 million barrels, to end at 319.2 million barrels last week. Crude supplies increased by 1.8 million percent of the five-year average said the Energy Department.

"It's hard to argue that there is any problem with crude oil supplies," Mueller said. "At least in the U.S., refiners have plenty of crude oil on hand."

Crude oil futures for May delivery increased to $104.78 a barrel, a $3.80 rise.

Brent Crude

For Brent crude, May delivery increased to $103.75 a barrel on London's ICE Futures Europe exchange, a $3.58 percent rise.