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Oil hits record above $56
Sharper-than-expected drop in gasoline and heating oil inventories sends energy prices soaring.
March 16, 2005: 4:28 PM EST

NEW YORK (CNN/Money) - Oil prices hit a record high Wednesday after a report showed sharper-than-expected declines in gasoline and heating oil inventories.

Crude oil for April delivery jumped $1.41, or 2.6 percent, to close at $56.46 a barrel in New York, after reaching as high as $56.60 -- well above the previous record close of $55.17 set on Oct. 22 and the record trading high of $55.67 set on Oct. 25.

In London, Brent jumped 95 cents to a record of $54.80 in the final day of April contract trading.

Oil supplies rose last week while inventories for gasoline and distillate, which is used for heating, fell more than expected, the Energy Information Administration said in its weekly report Wednesday.

According to the report, gasoline stocks fell 2.9 million barrels to 221.4 million barrels. Analysts polled by Reuters had expected a drop of just 800,000 barrels. Distillate stocks fell 1.9 million barrels to 107.3 million barrels.

Crude stocks grew a little more than expectations by 2.6 million barrels to 305.2 million barrels.

The EIA also raised its forecast for 2005 global oil demand to 84.3 million barrels a day and said the growth in demand, especially in China and the U.S., is responsible for the current high prices.

"I think this price move has been justified," Phil Flynn, senior market analyst at Alaron Trading told CNN/Money. "Demand in the world will probably hit the highest level in 30 years this summer."

"I want to pat (the EIA) on the back for admitting it," he added.

In a news conference Wednesday, President Bush said he was "concerned about the price of energy" and its dampening effect on the economy.

"Demand is outracing supply and supplies are getting tight," Bush said.

On the heels of Bush's statements, the Senate voted, 51 to 49, to open up the possibility of drilling in the Arctic National Wildlife Refuge (ANWR) in northeastern Alaska.

The refuge, which is home to caribou, migratory birds and other species, may house billions of barrels of oil beneath the coastal plain, making it one of the oil industry's most desired prospects.

But environmentalists have been staunchly opposed, arguing that drilling would damage a pristine wilderness while oil reserves there may not actually be that great.

If Congress agrees on a budget, drilling in the refuge could begin as early as this year.

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