Oil Rises, Gasoline Surges to Record on U.S. Fuel-Supply Drop

Crude oil rose more than $3 a barrel and gasoline surged to a record after an Energy Department report showed that U.S. supplies of the motor fuel fell a third week.

Gasoline stockpiles dropped 4.53 million barrels to 224.7 million barrels last week, the report showed. It was the biggest decline since August. The dollar dropped against the euro for the first time in three days, bolstering the appeal of commodities as a hedge against inflation.

``The robust supply cushion for gasoline appears to be vanishing before our eyes,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York.

Crude oil for May delivery rose $3.80, or 3.8 percent, to $104.78 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are up 59 percent from a year ago.

Gasoline for May delivery rose 13.53 cents, or 5.1 percent, to $2.7745 a gallon in New York. Futures touched $2.7836, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

The dollar fell after Federal Reserve Chairman Ben S. Bernanke said that the U.S. economy may contract in the first half of this year. Bernanke spoke to Congress's Joint Economic Committee today.

Commodity Rally

Futures prices rose to a record $111.80 a barrel on March 17 in New York as investors purchased commodities in response to the plunging U.S. dollar. Gold, silver and platinum futures were also higher today.

``The surge in prices over the last month was not driven by any change in the oil-market fundamentals,'' said Rachel Ziemba an analyst at RGE Monitor, an economic research company in New York. ``The primary reason for the rise in prices was the flow of funds by investors looking for a safe haven in the face of the credit crisis.''

Gasoline inventories were forecast to decline 2.75 million barrels, according to the median of 15 responses in a Bloomberg News survey.

``The gasoline drop was a real eye-opener,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Supplies are falling when we aren't even close to the driving season. We should be building stocks ahead of the driving season, not seeing them drop.''

U.S. gasoline demand increases during the summer, when Americans take to the highways for vacations. The peak- consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September.

Refinery Operations

Refineries operated at 82.4 percent of capacity last week, up 0.2 percentage point from the week before, the report showed. Plants used 87 percent of capacity during the same week last year. Utilization dropped 1.7 percentage points in the week ended March 21 to 82.2 percent of capacity, the lowest since October 2005, the department said in last week's report.

``With refiners sustaining operating rates below 85 percent, this trend will likely accelerate given the expected increase in seasonal gasoline demand,'' Kilduff said. ``Consumers need to maintain their vigilance in holding back on driving if they are going to have any chance in seeing lower prices soon.''

Crude-oil supplies rose 7.32 million barrels to 319.2 million barrels last week, the report showed. It was the 11th gain in 12 weeks. Stockpiles were estimated to advance 2.3 million barrels, according to the analyst survey. Inventories were 1.8 percent above the five-year average for the period, the department said.

``It's hard to argue that there is any problem with crude oil supplies,'' Mueller said. ``At least in the U.S., refiners have plenty of crude oil on hand.''

The Energy Department released its weekly report on inventories today at 10:30 a.m. in Washington.

Brent crude for May settlement rose $3.58, or 3.6 percent, to $103.75 a barrel on London's ICE Futures Europe exchange. Futures reached a record $108.02 a barrel on March 14.