Oil Rebounds Above $70 After Report Shows Gasoline Supply Drop

May 26 (Bloomberg) -- Crude oil rebounded, rising above $70 a barrel in New York, after an industry-funded report showed a drop in gasoline stockpiles in the U.S. and equities recovered from their worst levels.

Oil pared most of yesterday’s 2.1 percent slump after the American Petroleum Institute said gasoline supplies declined by 3.19 million barrels last week. The Dow Jones Industrial Average fell 22.82 points after plunging 292 points in early trade.

“A drop in gasoline supplies almost always gives the energy markets reason to trade higher,” said Mike Sander, an investment adviser a Sander Capital Advisors in Seattle. “Oil is also up after the Dow Jones rallied in trading at the end of its session. With such a positive reversal, the price of oil received a boost.”

Crude oil for July delivery rose $1.19, or 1.7 percent, to $69.94 a barrel in electronic trading on the New York Mercantile Exchange at 8:20 a.m. Sydney time. Yesterday, the contract fell $1.46 to $68.75 after dropping as much as 4.4 percent.

Oil fell yesterday as the dollar gained against the euro, reducing the appeal of commodities to investors. The shared currency declined as the International Monetary Fund said Spain has been too slow to strengthen its banking system.

The Standard & Poor’s 500 Index rose less than 0.1 percent after recovering from a 3.1 percent drop as U.S. stocks helped check a global retreat in equities.

Stocks Recover

The MSCI World Index of shares in 23 developed nations fell 1.5 percent, paring a drop of as much as 3.4 percent after the bank borrowing rate known as Libor rose for an 11th straight day and North Korea said it will sever ties with South Korea as tensions between the nations escalate.

U.S. crude supplies rose by 616,000 barrels last week, according to the American Petroleum Institute. An Energy Department report today may show supplies rose by 250,000 barrels in the seven days ended May 21, according to a Bloomberg News survey.

The department’s report may show gasoline inventories increased by 300,000 barrels, according to the median of 18 analyst estimates in the survey.

The Petroleum Institute collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Brent crude oil for July settlement dropped $1.62, or 2.3 percent, to end the session at $69.55 yesterday.