Oil jumps on inventory report

NEW YORK (CNNMoney.com) -- Oil prices turned sharply higher Wednesday, shrugging off rising oil supplies and instead focusing on a drop in refinery activity and unchanged gas stocks.

U.S. light crude for July delivery rose 91 cents to $66.26 a barrel on the New York Mercantile Exchange. Oil prices were lower before the government reported no change in gasoline stocks.

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In its weekly inventory report, the Energy Information Administration said gasoline supplies, closely watched in the summer driving season and running low all year, were unchanged last week.

Concern about gasoline supply had been easing because of rising inventories. The latest EIA was expected to show stocks increased for a sixth week, building up supplies in time for peak summer demand.

Gasoline stocks were forecast to have risen by 1.7 million barrels last week as refinery usage increased, according to Reuters.

Meanwhile, gasoline demand grew at an average rate of 1.4 percent over the last four weeks, down slightly from last week's reading of 1.5 percent, which could have helped limit gains.

Crude stocks rose by 100,000 barrels, while distillates, used to make heating oil and diesel fuel, increased by 300,000 barrels. Analysts were looking for a decline of 500,000 barrels of crude and an 1.5 million-barrel rise in distillates.

A decline in refinery activity also supported prices. EIA said refineries ran at 89.2 percent capacity, a slight drop from last week's 89.6 percent.

"The market was set up for a bearish report and this surprised everyone, especially the refining number," Mike Fitzpatrick, vice president, energy risk management, at Man Financial in New York, told Reuters.