NEW YORK (MarketWatch) - Energy stocks rose Wednesday on an unexpected drop in petroleum supplies, even as investors mostly shrugged off the highest storage levels of gasoline and other petroleum products rose to an 11-year high. A positive surprise from Intel (INTC 18.05, +1.22, +7.25%) as well as a relatively bright piece of economic data encouraged investors, with the Consumer Price Index rising 0.7% as expected in June. U.S. crude inventories fell more than expected last week, the Energy Information Administration reported Wednesday, but total stockpiles of gasoline, diesel, and other petroleum products rose for a 16th straight week to an 11-year high. Crude inventories fell by 2.8 million barrels in the week ended July 10, according to fresh data from the Energy Information Administration. Analysts surveyed by Platts had expected a decline of 2.1 million barrels. Total petroleum product inventories rose to 771.5 million barrels, the highest level since September, 1998. XOI 904.66, +24.32, +2.76% 10%0%-10%-20%-30% 09FMAMJJ On the New York Mercantile Exchange, August futures contracts for crude oil rose $1.25 to $60.77. See full story. The NYSE Arca Oil Index (XOI 904.66, +24.32, +2.76%) jumped 2.5% to 902. The NYSE Arca Natural Gas Index (XNG 410.95, +9.75, +2.43%) rose 2.3% to 411. The Philadelphia Oil Service Index (OSX 159.40, +4.41, +2.85%) rose 2.3% to 158. In a cause for optimism in the energy sector, OPEC now sees world oil consumption will grow by 500,000 barrels a day in 2010 after two years of declines, through demand in China, India, the Middle East and Latin America. Among stocks in the spotlight, analysts at Tudor Pickering Holt on Wednesday upgraded shares of Questar Corp. (STR 31.47, +0.80, +2.61%) to a buy based on valuation. The gas producer's holdings in the Haynesville Shale are "going to be bigger and more impactful sooner that Wall Street realizes," analysts said. Shares rose 2.4% to $31.40. Also in the natural gas sector, Chesapeake Energy (CHK 19.03, +0.58, +3.14%) rose 3% to $19 after Calyon Securities raised its rating on the company to buy. PetroChina (PTR 106.98, +3.98, +3.86%) rose 3.1% to $106.21 despite a downgraded by Morgan Stanley to equal weight from overweight.

Source