Crude Prices Hold as U.S. Inventory Drops

Oil prices held near $52 on Wednesday as a U.S. government report showed crude stocks falling for the first time in 10 weeks and gasoline inventory dropping ahead of peak summer driving demand.

U.S. light crude eased 19 cents to $52.10 a barrel, barely $6 below the record high of $58.28 reached early this month. Prices jumped $1.92, or nearly 4 percent in New York on Tuesday, ending a two-week slide.

London Brent crude gained 16 cents to $53.10 a barrel.

The U.S. Energy Information Administration (search) said crude stocks, which have been at the highest level in nearly three years, dropped 1.8 million barrels to 318.9 million last week as high import levels eased.

"Inventories are in the high end of historical averages, and in the short run, it doesn't do a lot to change the big inventory picture," said Tom Bentz, analyst at BNP Paribas.

Gasoline stocks also fell, by 1.5 million barrels to 211.6 barrels, as demand held strong in the face of higher pump prices the EIA said.

Gasoline prices have already rallied on a spate of refinery problems in Kansas, Louisiana, and Texas, which dealers said could sap a supply buffer ahead of the summer driving season when demand for gasoline peaks.

The refinery glitches sent U.S. unleaded gasoline on NYMEX up by 5 percent on Tuesday. The contract was last down 1.41 cents to $1.5560 a gallon.

The two-week slide was triggered by rising crude inventories in the United States, additional OPEC supply and signs that strong oil demand growth, especially in China, was easing.

But as China's economy grew by a faster-than-expected 9.5 percent in the year through the first quarter, oil demand might stay healthy. The pace of economic growth could force Beijing to further tighten investment and credit curbs, analysts said.

President Bush said on Tuesday he would raise concerns about the effects of high energy costs on the global economy when he meets Saudi Crown Prince Abdullah in Texas next week.

"I don't think they're pumping flat out," Bush said, adding that he planned to ask the Saudi prince whether it was possible for the kingdom to step up oil production.

"I think they're near capacity, and so we've just got, got to get a straight answer from the government as to what they think their excess capacity is," he said in a televised interview.

The head of OPEC (search) said on Monday the producers' cartel would pump near 25-year highs next month although it would postpone any formal increase in output limits until a June meeting.

Qatari Oil Minister Abdullah al-Attiyah said on Wednesday that prices in a $40-$50 range are reasonable. "I believe there is no shortage of supply. The world will not face another shock," he said.