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Crude Oil Recovers a Penny

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Crude Oil Recovers a Penny

Gasoline Demand Continues to Fall; Mixed Messages
By BRIAN BASKIN
July 10, 2008; Page C6

Oil futures broke a two-session losing streak, but failed to recover much ground as signs of weakening U.S. demand for gasoline prevented a rally.

[Futures]

Light, sweet crude for August delivery settled a penny higher at $136.05 a barrel on the New York Mercantile Exchange. Futures remain about 6% below the record settlement of $145.29 on July 3, after big drops on Monday and Tuesday.

A 5.8-million-barrel drop in U.S. oil inventories for the July Fourth week exceeded expectations but didn’t provide much of a boost to prices. U.S. inventory levels have fallen to the lowest level for July in five years, however.

Gasoline demand is still falling nationwide, off 2% in the month leading to July Fourth from a year earlier, according to the U.S. Energy Information Administration. Inventories rose by 900,000 barrels, higher than the average gain of 200,000 forecast by analysts. Distillate inventories, including heating oil and diesel, rose by 1.8 million barrels, just below the analyst consensus.

Oil-producing nations provided a mixed bag for traders. Iran tested missiles, increasing tensions, butRoyal Dutch Shell PLC said it restored some Nigerian production shut in the last month by militant attacks.

“The fact that we didn’t crash is no surprise; we’ve come down so far so fast this week,” said Darin Newsom, senior analyst at DTN, a market-information service in Omaha, Neb. “But the fact that we weren’t able to hold gains is also not a surprise.”

With the market having rebounded from corrections almost monthly this year, not everyone was willing to call a top to oil prices. “I would be buying this dip rather than selling into it,” said Chris Jarvis, president of Caprock Risk Management.

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