Oil prices climb toward USD 66 a barrel after report shows drop in U.S. gasoline stocks

Oil prices rose slightly Thursday after a midweek U.S. fuel supplies report showed a large, unexpected drop in gasoline stockpiles and a fall in refinery utilization.

Light, sweet crude for June delivery rose 10 cents to US$65.94 a barrel in Asian electronic trading on the New York Mercantile Exchange midmorning in Singapore. The contract on Wednesday gained US$1.26 to settle at US$65.84 a barrel.

U.S. gasoline stocks have fallen in recent weeks in part because of low production by refiners, which continued to report trouble. Refinery utilization dropped 2.6 percent, Wednesday's U.S. Department of Energy's petroleum supply report showed.

Gasoline inventories fell by 2.8 million barrels in the week ending Friday, which left inventories at their lowest level since October 2005, the report said. Analysts had expected a 200,000-barrel increase.

But crude oil inventories rose 2.1 million barrels to 334.5 million barrels. Distillate stockpiles, which include heating oil and diesel fuel, remained flat as heating oil inventories fell while diesel stockpiles rose.

Despite a surprising buildup in crude oil inventories, traders focused on the fact that gasoline inventories and refinery capacity in use are both falling just before the vacation driving season - sparking worries about whether refiners can adequately supply summer driving demand.

Problems this week at a BP PLC refinery in Whiting, Indiana, and a ConocoPhillips refinery in Wilmington, California, are contributing to supply concerns, wrote Barclays Capital analysts in a Wednesday research note.

Heating oil futures dropped 0.31 cent to US$1.8984 a gallon (3.8 liters) while natural gas prices rose a tad to US$7.696 per 1,000 cubic feet.