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Big draw in gas stocks sends energy prices jumping

OIL prices climbed to highs for the year yesterday when a surprise drop in U.S. gasoline stockpiles pulled up the cost of fuels ranging from natural gas to heating oil.

One day after jumping above US$75 per barrel for the first time this year, benchmark crude prices rose another US$2.40 to settle at US$77.58 yesterday on the New York Mercantile Exchange. At one point, prices were 3 cents shy of US$78 per barrel.

U.S. energy markets had largely brushed off a winter weather forecast this week for major winter storms in the East and icy, cold conditions even between Atlanta and Dallas.

The Energy Information Administration, however, reported yesterday that gasoline in storage fell by more than 5 million barrels at a time when most energy experts expected supplies to grow yet again.

The government report showed that refiners had cut way back on production, the result of idled facilities due to a lack of demand and also planned, seasonal maintenance.

Earlier yesterday, the dollar hit a 52-week low and the surprise report on gasoline may have led some people to believe supplies are growing tight, said oil analyst Tom Kloza said.

"The ignition switch for a rally got hit twice today," Kloza said.

For U.S. consumers, that may mean a slight drift upward in pump prices but not much, experts believe.

Crude and gasoline prices have remained relatively stable for months with no clear signs of an economic rebound.

Prices began to rise late last week when Alcoa, which kicks off the earnings season, reported that it had returned to profitability after three straight quarterly losses.

While the government reported that crude placed into storage grew again last week, it wasn't as big of a build up as many experts had expected and that may have helped push prices higher as well.

Natural gas inventories also grew, the EIA reported yesterday, and levels now sit nearly 15 percent above the five-year average.

Despite an uptick in prices, U.S. consumers should still be in for a relatively cheap winter as far as heating the home.

"The good news here is that heating oil distributors and natural gas distributors for that matter, too, were building stocks this past summer when prices were at their lowest," said analyst Stephen Schork. "They're sitting on cheap inventory so you're not going to see a major spike in heating costs."

The EIA has forecast an 8 percent drop in heating bills this winter. The government reported that heating oil prices rose 3 cents last week to US$2.53 per gallon. Last year at this time, a gallon of heating oil cost US$3.39.

In other Nymex trading, heating oil futures rose 7.53 cents to settle at US$2.0181 a gallon while natural gas for November delivery rose 4.6 cents to settle at US$4.482 per 1,000 cubic feet. Gasoline for November delivery gained 8.74 cents to settle at US$1.9449 a gallon.

In London, Brent crude rose US$1.35 to settle at US$74.45 on the ICE Futures exchange.


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