Oil prices retreated slightly in Asian trading Thursday after a U.S. government report boosted prices by failing to alleviate concerns that refiners are still not producing enough gasoline to meet demand.
Light, sweet crude for July delivery dropped 8 cents to US$66.18 a barrel on the New York Mercantile Exchange midmorning in Singapore.
The contract jumped 91 cents Wednesday to settle at US$66.26 a barrel after the U.S. Energy Information Administration's weekly snapshot showed U.S. gasoline stockpiles were unchanged last week and refinery utilization fell.
"There were general expectations that gasoline inventories would continue to build ... but the market didn't see it," said Victor Shum, energy analyst with Purvin & Gertz in Singapore.
The price has stayed above US$66 a barrel, "a strong level - and the strong pricing is supported by the tight U.S. gasoline supply situation," Shum said.
Gasoline inventories were unchanged at 201.5 million barrels for the week ended June 8, the EIA report said. Analysts had expected gas inventories to rise by 2 million barrels. Gas stockpiles are 6 percent lower than inventories in the same week a year ago.
Refinery utilization, which had been expected to grow by 0.8 percent, fell 0.4 percent to 89.2 percent, the second straight weekly decline. Most analysts say refineries should be using 94 percent to 95 percent of their capacity at this time of year.
Crude oil inventories rose by 100,000 barrels last week, when analysts had expected a 400,000-barrel decline.
Distillate stocks, which include heating oil and diesel fuel, rose 300,000 barrels a day, falling short of expectations for a 1.5 million barrel-per-day increase.
U.S. refiners reported an unusually high number of outages this spring, crimping gasoline supplies. Reports of outages continued on Wednesday, with Valero Energy Corp. saying it was shutting down a machine at its Ardmore, Okla., refinery for maintenance.
"The gasoline supply in the U.S. looks to be a key factor driving the crude oil market. It's like the tail wagging the dog," Shum said.
Geopolitical factors also continue to provide a floor for oil prices, he said.
Tensions over Iran's atomic programme escalated following Tehran's recent reduction of cooperation with the U.N. atomic monitoring agency. Calls for the Organization of Petroleum Exporting Countries to increase output have also largely been ignored, with the cartel stressing that supplies are sufficient.
In other Nymex trading, heating oil futures lost 0.2 cent to US$1.9600 a gallon (3.8 liters) while natural gas prices gained 1.7 cents to US$7.625 per 1,000 cubic feet.