Oil hovers near $75 in Asia after report shows US crude supplies drop more than expected

SINGAPORE (AP) — Oil prices hovered near $75 a barrel Thursday in Asia after a report showed U.S. crude inventories fell more than expected, suggesting demand may be improving.

Benchmark oil for October delivery was up 1 cent at $74.68 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 58 cents to settle at $74.67 on Wednesday.

Crude inventories fell 7.3 million barrels last week, the American Petroleum Institute said late Wednesday. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of 730,000 barrels. Inventories of gasoline and distillates rose, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Thursday.

Despite last week's decrease, U.S. oil supplies are at a 30-year high and that weighs on crude prices, energy consultancy Cameron Hanover said.

The Energy Department said Wednesday it expects the December contract to settle at $78 a barrel and the December 2011 contract to settle at $84 as a jump in demand from China helps offset slowing growth in developed countries. China will likely consume an average of 9.5 million barrels a day next year, up 46 percent from 2002, the department said.

"It seems all the eggs are being placed in the emerging markets," energy trader and consultant the Schork Report said. "Given the tendency for bubbles and crashes in that region, we would remain very cautious."

In other Nymex trading in October contracts, heating oil rose 0.24 cent to $2.084 a gallon and gasoline was steady at $1.939 a gallon. Natural gas for October delivery held at $3.815 per 1,000 cubic feet.

In London, Brent crude was up 9 cents at $78.26 on the ICE Futures exchange.