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NEW YORK (CNN/Money) -
Oil prices rose above $65 a barrel Wednesday after a government report said crude oil inventories fell by more than expected and gasoline inventories surprisingly surged, which may lower retail gasoline prices at the pump.
The price for U.S. light sweet crude for October delivery jumped about 3 percent, or $1.98, to settle at $65.09 on the New York Mercantile Exchange. The contract, which stood at $63.85 just before the Energy Information Administration released its report, climbed as high as $65.20 after the report, then fell back before rebounding.
Even with Wednesday's rise, prices are almost $6 below the record trading high of $70.85 hit shortly after Hurricane Katrina slammed into the Gulf Coast.
Investors were closely watching the inventory data for a sense of the future direction of energy commodities. Katrina shut down much of oil and gas production in the Gulf, prompting the government to tap emergency oil reserves.
Crude oil inventories dropped by 6.6 million barrels for the week ended Sept. 9, versus forecasts for a 2 million barrel drop according to Briefing.com. At 308.4 million barrels, the inventory was above the upper end of the average range for this time of year.
Total motor gasoline inventories rose by 1.9 million barrels last week, the EIA reported, putting them above the upper end of the average range for this time of year. Analysts polled by Briefing.com estimated a drop of 2.2 million barrels in inventory.
Distillate fuel inventories fell by 4.1 million barrels last week, and are in the upper half of the average range for this time of year. The consensus among analysts polled by Briefing.com anticipated a fall of 150,000 barrels.
"It is a surprising report in just about all respects," said Tim Evans, senior energy analyst at IFR Markets. "But I think it is something that we have to expect in times like these that the data doesn't always fit into a neat little model of what we think ought to be happening."
The government agency also reported that gasoline production rose substantially for the week, averaging nearly 8.5 million barrels per day.
Evans also attributed the jump in motor gasoline supplies to a rise in imports and weakening demand.
The EIA said in its weekly report Wednesday that import levels of gasoline should remain high over the next few weeks and will push down retail gasoline prices within the U.S. through September and possibly longer.
"Increased supply will put downward pressure on prices (and) EIA expects retail prices to continue dropping over the remainder of the month and possibly longer," the agency said.
As of Wednesday, the travel club AAA reported that the nationwide average for a gallon of regular unleaded gasoline fell over two cents to $2.935, from Tuesday's average of $2.956.
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Click here for CNN/Money's special report 'Oil Crunch 2005'.
How will Hurricane Katrina affect energy supply this winter? Click here.
--from staff and wire reports
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