Oil Rises To $60 As US Gasoline Supplies Dwindle

Oil prices rose above $60 a barrel on Wednesday after a big drop in gasoline supplies

Oil prices rose above $60 a barrel on Wednesday after a big drop in gasoline supplies in the United States raised worries of a crunch leading into the summer driving season in the top fuel consuming country.

A weekly U.S. government report showed gasoline stocks fell 3.4 million barrels last week, extending a decline in inventories that has brought them more than 7 percent below where they were in early February.

Stockpiles of the key motor fuel have been dwindling due to low production by U.S. refineries amid seasonal maintenance and unplanned repairs, along with slower imports from overseas, according to the U.S. Energy Information Administration.

"I'm concerned by the gasoline stocks decline," said Jason Schenker, economist at Wachovia Corporation in North Carolina. "This is really going to be critical."

U.S. crude settled up 36 cents to $59.61 a barrel, but pushed up to $60.08 in electronic trade after the settlement. London's Brent settled up 57 cents at $60.77.

Gasoline futures, which hit a seven-month high of $1.985 a gallon on Tuesday, were down 0.72 cent to $1.9349 a gallon as some investors took profits, limiting crude's rally.

U.S. crude has risen from a 20-month low of $49.90 hit in January, partly because of supply cuts by OPEC, though it is well below an all-time high of $78.40 reached last July.

BP Plc cut rates to a gasoline-making unit at its Texas City refinery, a source familiar with refinery operations said. The news helped support energy prices.

Besides the drop in gasoline stocks, the EIA report showed a 1.7 million barrel fall in distillates and a 4 million barrels rise in crude inventories.

The U.S. inventory data followed a report earlier on Wednesday from Euroilstock showing gasoline production edged lower in Europe last month.

The Organization of the Petroleum Exporting Countries, source of more than a third of world output, agreed last week to keep current oil supply restraints in place.

OPEC oil ministers have not ruled out further action on supply before September, when they are next scheduled to hold a meeting to decide their production policy.