Oil: US petrol supplies fall

Oil prices gained 33 cents to hold over US$66 a barrel on Wednesday on worries over falling US petrol inventories as the world's top energy consumer gears up for the summer driving season.

US light crude last traded 33 cents higher at US$66.40 in afternoon activity as petrol surged 6.55 cents to US$1.9500 a gallon. London Brent crude futures settled 58 cents higher at US$65.55 a barrel.

US petrol supplies declined by 5.4 million barrels, the government's Energy Information Administration (EIA) reported, surpassing analyst expectations for a 1.3 million barrel fall.

"The petrol figure was the important number, the decline was much larger than expected," said Jim Ritterbusch, president of Ritterbusch and Associates.

But some experts said the drawdown was to be expected as the US oil industry cleared its stocks in preparation for the replacement of the water-polluting additive MTBE in petrol.

Virtually all US refiners plan to stop using methyl tertiary butyl in petrol supplies prior to the start of the summer driving season, the EIA said. Refiners are also performing heavy maintenance on units in preparation for new fuel specifications.

Concerns about supplies of ethanol, a corn-based additive which refiners will blend into petrol instead of MTBE to reduce smog, have also helped support markets.

Producers are ramping up ethanol output to meet the growing demand, but the EIA said supplies could be tight during the US summer season, when petrol demand rises as vacationers take to the road.

US crude stocks rose a larger-than-expected 2.1 million barrels last week, while distillate supplies fell 2.5 million barrels.

Prices have stayed above US$60 for more than a month on worries geopolitical risks in oil-exporters such as Nigeria, Iran and Iraq would keep supplies tight.

The threat of sanctions against Iran over its nuclear programme lingered in the background, though Western powers softened a draft United Nations Security Council statement on reining in Iran's uranium enriching efforts.

Foreign ministers from the five veto-holding permanent members of the council meet in Berlin on Thursday in an effort to end a deadlock over how to proceed.

- REUTERS