Crude-oil futures rose Wednesday to their highest level in more than six months, topping $61 a barrel as government data showed U.S. crude inventories fell more than expected last week. But the report also contained a few bearish signs. Total petroleum demand still remained weak comparing with a year ago, and U.S. refineries kept their production level low in anticipation of weak demand. Crude inventories decreased by 2.1 million barrels in the week ended May 15, the Energy Information Administration reported. Analysts surveyed by energy information provider Platts had expected a decline of 1.5 million barrels. Crude for July delivery, the new front-month contract, gained $1.43, or 2.4%, to $61.53 a barrel on the New York Mercantile Exchange. Front-month contracts haven't closed above $60 a barrel since Nov. 10. Despite the decline, crude inventories, at 368.5 million barrels, were still above the upper boundary of the average range for this time of year, the EIA said. Refineries, meanwhile, operated at 81.8% of their operable capacity last week, slightly higher than a week ago but much lower than the 83.7% analysts had expected. Lower refinery production pushed gasoline inventories down by 4.3 million barrels to 204 million barrels, falling below the lower limit of the average range, EIA data showed. The EIA also reported distillate stockpiles rose by 600,000 barrels. On the demand side, motor gasoline demand has averaged about 9.1 million barrels per day over the past four weeks, down by 1.2% from the same period last year. Demand for distillate fuels, which include heating oil and diesel, fell 12%, and jet fuel consumption dropped 9%. The American Petroleum Institute, an industry group, reported Tuesday after oil's floor trading closed that inventories dropped by 4.5 million barrels last week. The EIA and the API use different criteria for gauging inventory levels. "The only thing bearish about the EIA report was that it was not as bullish as the API," said Phil Flynn, vice president at futures trading firm Alaron Trading. Rally overdone? Crude has surged more than 70% since February's low near $34 a barrel. "The global recovery could be hampered by rising crude and gasoline prices," said Tariq Zahir, managing member at futures trading firm Tyche Capital Advisors. Some analysts had pointed out that the recent rally in oil prices was overdone. Gains in oil prices were mainly "due to the vagaries of equity markets and a weakened U.S. dollar than inventories," said Eugen Weinberg, an analyst at Commerzbank, in a note. "Relying on equity markets and the dollar to support oil prices alone will be insufficient," she added. Also in energy trading Wednesday, June-reformulated gasoline rose 3.95 cents, or 2.2%, to $1.852 a gallon, and June heating oil gained 3.61 cents, or 2.4% to $1.5227 a gallon. Natural gas for June delivery rose 2.6 cents, or 0.7%, to $3.94 per million British thermal units.

Source