Oil prices swing wildly on Iran, gasoline
Big drop in gas supplies ahead of U.S. summer driving season provides support, but prices down on Iran news.
NEW YORK (CNNMoney.com) -- Oil prices moved off their lows Wednesday after a big drop in gasoline inventories provided some support for a market pummeled by a resolution to the standoff between Iran and Britain over 15 British hostages.
U.S. crude oil for May delivery fell 26 cents to settle at $64.98 a barrel on the New York Mercantile Exchange, after tumbling more than $1 earlier in the day.
The earlier drop came after Iranian President Mahmoud Ahmadinejad said he pardoned 15 British sailors in Iranian custody and vowed to set them free. He made the remarks during a live televised news conference just after 9 a.m. ET.
But the big price decline that followed got more than halved by the U.S. government's weekly report on oil and gas inventories.
In its report, the Energy Information Administration said gasoline stocks, closely watched ahead of the summer driving season, plummeted by 5 million barrels. Analysts were looking for a small drop of just 300,000 barrels, according to Reuters.
The fall in gasoline supplies pushed gasoline stocks to the lower end of their average range, the first time in several months the supplies have dipped below average.
One analyst noted that the Iran situation had pushed up oil prices $2 to $3 over the past couple of weeks and credited the big fall in gas stocks with preventing a sell-off of similar magnitude.
"We're nowhere near where we should be in terms of inventories," said John Kilduff, an energy analyst at Fimat in New York, who also pointed to strong gasoline demand numbers in the report. "We're seeing the kind of numbers we only see during the peak summer season."
Kilduff also noted the relatively low rate of refinery operation, which EIA said was at 87 percent capacity last week.
"The failure of the refinery rate to go to 90 percent is spelling lots of trouble for us," he said.
The front-month contract for reformulated gasoline jumped more than $5 cents on NYMEX.
EIA said crude inventories climbed 4.3 million barrels, well above the gain of just 600,000 barrels that analysts were expecting.
Stockpiles of distillates used for heating oil and diesel fuel remained unchanged.
Despite the big drop in gasoline supplies, falling gasoline inventories have been routine in recent weeks as refineries and wholesalers empty their stocks of winter blends and prepare to take on cleaner-burning summer supplies.
The expected switchover in gasoline stockpiles could be part of the reason oil prices failed to move into positive territory, as traders focused on the news from Iran.
The British sailors and marines were captured March 23 during a routine ship inspection in disputed waters off Iraq. Iran claimed the sailors strayed into its territory, a charge the British deny.
The standoff had pushed crude prices to seven-month highs as traders feared a confrontation with Iran, the world's fourth-largest oil exporter, which sits just north of the narrow Strait of Hormuz, gateway for a quarter of the world's oil supplies.
Oil prices are now trading at the high end of their multiweek range of between $55 and $65 a barrel. Crude has swung widely over the past 12 months, hitting a trading high of $78.40 last July but then briefly falling below $50 a barrel in January.