The U.S. Energy Information Administration reported Wednesday that gasoline stocks grew 1.5 million barrels last week to 196.7 million barrels. Analysts had forecast a rise of about 800,000 barrels. Crude oil supplies rose 2 million barrels to 344.2 million barrels, just above the upper end of the average for this time of year. Analysts had predicted a fall of 200,000 barrels.
Distillate inventories, which include heating oil and diesel fuel, edged up 500,000 barrels to 120.3 million barrels, falling short of analysts' estimate of a rise of 900,000 barrels. Distillate stocks remain just below the upper end of the average for this time of year.
Light, sweet crude for July delivery dropped 8 cents to US$65.69 a barrel on the New York Mercantile Exchange midmorning in Singapore. The contract rose 26 cents to settle at US$65.77 a barrel Wednesday.
"The market is just looking at gasoline, and crude oil prices are tracking the gasoline market," said Tetsu Emori, chief commodities strategist with Mitsui Bussan Futures in Tokyo.
Prices were supported, despite the rising gasoline stockpile, by concerns that supplies will be stretched as more vehicles hit U.S. roads during the Northern Hemisphere summer. The so-called U.S. driving season starts with the coming long Memorial Day weekend.
"Gasoline demand is still high, much higher than the last few years," Emori said. "This is a problem, so (the U.S.) will have to do a few things: push down demand, increase the domestic gasoline production at U.S. refineries and also increase the import of gasoline from overseas."
News that Iran has expanded its uranium enrichment program, and that the U.S. Navy is holding unannounced exercises off Iran's coast, also buoyed crude prices.
The U.S. Navy staged a show of military force in the Persian Gulf Wednesday, just two days before direct U.S.-Iran talks in Baghdad. Traders and analysts fear any conflict with Iran could result in the closure of the Strait of Hormuz and cut off about 40 percent of the world's exports.
In other Nymex trading, heating oil futures rose a tad to US$1.9330 a gallon (3.8 liters) while natural gas prices gained 1.5 cents to US$7.772 per 1,000 cubic feet.