Oil climbs above $74 on supply drop

NEW YORK (CNNMoney.com) -- Oil prices rose for a second day Wednesday after a report from the Energy Department showed crude inventories fell more than expected last week.

What prices are doing: Crude oil for July delivery gained $2.39, or more than 3%, to settle at $74.38 a barrel on Wednesday.

• Email
• Print
• Comment

The national average price for a gallon of regular unleaded gasoline fell to $2.713 from the previous day's price of $2.718, according to motorist group AAA.

What's moving the market: Prices ticked higher after a closely-watched inventory report from the the U.S. Energy Information Administration showed that oil inventories fell more than expected last week.

The EIA said crude supplies fell 1.8 million barrels in the week ended June 4, more than the 1.3 million barrel drop expected by analysts.

Gasoline inventories edged lower by 8,000 barrels, while distillates, which include heating oil and diesel, climbed 1.8 million barrels.

Analysts were looking for a 430,000 barrel increase in gasoline stocks and a rise of 550,000 barrels in distillate inventories, according to a survey conducted by research firm Platts.

Separately, after the market's close on Tuesday, the American Petroleum Institute reported a larger-than-expected decrease in oil stocks as well.

News reports that China's exports surged last month also boosted oil prices on Wednesday, said Chris Lafakis, an associate economist at Moody's Economy.com.

What analysts are saying: Lafakis said he expects prices to rise to an average of $81.83 in the last quarter of the year.

"I'm optimistic about prices because I'm more optimistic about the U.S. and the global economy's prospects for growth," he said. "Job growth is going to strengthen throughout the year and manufacturing growth has already been stronger than expected, and this all bodes well for the economy."

But, the rosy forecast for oil prices near $82 by the fourth quarter assumes that the euro zone's debt crisis doesn't worsen, Lafakis said.

"The key assumption is that the European debt crisis is over and that we're not going to get any more financial disruptions as a result of debt problems in European member countries," he said. "If we do get any more disruptions out of Europe, that forecast will probably be too optimistic."