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Crude hits six-month high before holiday weekend

OIL prices hit a six-month high yesterday, climbing above US$62 a barrel after a government report showed a drop in U.S. oil supplies for the second straight week.

Benchmark crude for July delivery rose US$1.94 to settle at US$62.04 a barrel on the New York Mercantile Exchange. Crude prices jumped to US$62.14 earlier in the day, the highest price for crude since Nov. 11.

In London, Brent prices increased US$1.67 settle at US$60.59 a barrel on the ICE Futures exchange.

Crude stockpiles dropped by 2.1 million barrels for the week ended May 15, according to Energy Department's Energy Information Administration. Gasoline inventories dropped by 4.3 million barrels.

That was a bigger decline than analysts had expected, especially for gasoline.

One of the main drivers this year for energy prices has been the enormous amount of crude and gasoline in storage. Recently, benchmark crude prices also have been heavily influenced by the stock market and the strength of the dollar.

A number of other issues, from fires at refineries, to falling inventories, to the first big driving holiday of the year, are sending gas prices upward.

Retail gasoline prices have risen every day this month.

"If you mix that with fires at refineries this week, and the optimism that's in the equities markets right now, you have the ingredients for a rally" in energy prices, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

Still, oil supplies remain at 19-year highs as Americans cut back on spending. For weeks, government data has shown that the country's consumption of petroleum products has dropped to its lowest levels in a decade.

At the pump, U.S. gas prices added two cents overnight to a new national average of over US$2.334 a gallon (62 cents a liter) yesterday, according to AAA and the Oil Price Information Service. Gas is 27.6 cents a gallon more expensive than a month ago, but it's US$1.466 a gallon cheaper than last year.

Kloza said he expects gas prices to continue to climb near US$2.40 just before Memorial Day weekend as a drop in refinery activity forces pump prices higher.

In other Nymex trading, gasoline for June delivery fell less than a penny to settle at US$1.8095 a gallon and heating oil rose 5.45 cents to settle at US$1.5411 a gallon. Natural gas for June delivery added 6.8 cents to settle at US$4.098 per 1,000 cubic feet.


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