Oil Ends Up at $118.30; Down from Tuesday's High

Oil rose on Wednesday after U.S. government data showed a bigger-than-expected decline in gasoline stocks ahead of the summer driving season, offsetting a build in crude inventories.

Oil Refinery
Oil Refinery

U.S. light, sweet crude for June delivery settled 23 cents higher at $118.30 a barrel. Supply concerns sent the May contract to a record high $119.90 before it expired on Tuesday.

London Brent crude gained 51 cents to settle at $116.46 barrel, after hitting a record $116.75 on Tuesday.

"Overall, the stats were bullish. Gasoline stocks fell more than expected, most in Padd 1 [East Coast]," said Tom Bentz, analyst for BNP Paribas Commodities Futures in New York.

U.S. gasoline futures hit a new record after government data showed a 3.2 million barrel drop in inventories last week as the United States gears up for summer holiday travel.

Distillate stocks fell 1.4 million barrels, despite a 4.2 percentage point rise in U.S. refinery runs. Crude oil stocks showed a 2.4 million barrel build, double analysts' forecasts, primarily from gains on the West Coast.

Rebel attacks on oil pipelines in OPEC member Nigeria helped push markets to fresh highs this week, forcing Royal Dutch Shell to declare force majeure on Bonny Light exports after 169,000 barrels per day (bpd) of oil was shuttered.

Further support came from potential disruptions stemming from a strike at the Grangemouth refinery in Scotland.

Union and management representatives are in talks to avoid the two-day stoppage, scheduled to start on Sunday, which could cause a reduction in flows of North Sea oil and natural gas production.

Oil prices have jumped more than five-fold since 2002 as global supplies stretch to keep pace with surging demand from emerging economies such as China.

President George W. Bush on Tuesday said he was concerned about record high crude oil and gasoline prices, which have weighed on consumers already stung by the nation's wider economic problems.

Energy producers meeting with consumers in Rome this week said the world might have to live with high oil prices to ensure supplies for the future.