Oil Trades Above $74 After Rising on Drop in Gasoline Supplies

June 4 (Bloomberg) -- Oil traded above $74 a barrel in New York after rising on a government report that showed U.S. crude and gasoline inventories dropped more than expected as fuel consumption surged.

Oil advanced 2.4 percent yesterday after the Department of Energy said gasoline supplies fell 2.65 million barrels to 219 million last week, the lowest level this year. Stockpiles were forecast to drop by 500,000 barrels, according to analysts surveyed by Bloomberg News. Fuel demand increased 1.6 percent to 20 million barrels a day, the highest level since Jan. 30, 2009.

The Energy Department report “does suggest there is a bit more life in U.S. oil demand at the moment,” David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney, said by telephone today. “There are signs that the U.S. is continuing to recover.”

Crude oil for July delivery traded at $74.47 a barrel, down 14 cents, in electronic trading on the New York Mercantile Exchange at 9:54 a.m. Sydney time. Yesterday, the contract rose $1.75 to $74.61. Futures are poised for a 0.7 percent gain for the week, the second consecutive weekly increase.

Oil prices also rose yesterday after the U.S. government said producers will have to resubmit plans to drill in Gulf of Mexico waters less than 500 feet deep.

The Obama administration is “pulling back” exploration plans and requiring updated information to “ensure that new safety standards and risk considerations are incorporated,” Bob Abbey, acting director of the Minerals Management Service, said in a statement June 2.

Crude Supplies

U.S. crude oil supplies fell 1.9 million barrels to 363.2 million last week. Inventories were forecast to be unchanged, according to the Bloomberg News survey.

Stockpiles of crude oil at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is delivered, rose 0.7 percent to 37.9 million barrels, the second-highest level since the Energy Department started keeping records at the storage hub in 2004.

Consumption of all fuels climbed 8.1 percent to 19.7 million barrels a day from a year earlier in the four weeks ended May 28, according to the Energy Department.

Brent crude for July settlement gained $1.66, or 2.3 percent, to end the session at $75.41 a barrel on the London- based ICE Futures Europe exchange yesterday. It was the highest settlement since May 14.