Crude oil rose to a three-week high after a government report showed that U.S. gasoline inventories fell as demand strengthened and refineries cut operating rates, Bloomberg reported.
Gasoline supplies plunged 3.32 million barrels to 215.3 million barrels last week, the Energy Department said. Consumption of the motor fuel averaged 9 million barrels a day over the past four weeks, up 1.7 percent from the same period last year. Refineries operated at 81.4 percent of capacity, down 0.9 percentage point from the week before.
"Crude oil is up because gasoline demand is increasing," said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. "A lot of refiners shut units for maintenance because the demand wasn't there. With demand rising they may have to change some of their plans."
Crude oil for April delivery rose $2.48, or 6.2 percent, to $42.44 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $42.78, the highest since Jan. 30. Prices are down 4.8 percent this year.
Gasoline futures for March delivery increased 8.15 cents, or 7.5 percent, to $1.1652 a gallon in New York. Futures reached $1.1758, the highest since Feb. 17.
The average U.S. pump price for regular gasoline dropped 0.9 cent to $1.891 a gallon yesterday, AAA, the nation's largest motorist organization, said on its Web site. Prices have declined 54 percent from the record $4.114 a gallon reached in July.
"Gasoline prices are down, making it more affordable, so people are buying more," Sieminski said. "This is a hopeful sign for the economy as a whole. Lower prices may encourage people to make other purchases, helping the economy."
Analysts were split over whether the report would show a gasoline inventory increase or decline, according to the median of 15 estimates in a Bloomberg News survey.
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