Oil prices fluctuated Thursday after a government report showed that U.S. crude-oil inventories rose more than expected last week while heating-oil supplies fell more than expected. In its weekly petroleum inventory report, the Energy Department said crude supplies rose by 4.2 million barrels last week, significantly more than the 2.9 million-barrel increase expected by analysts. According to the report, gasoline inventories rose by about 1 million barrels last week, in line with expectations. However, supplies of distillates-including heating oil, diesel, and jet fuel-fell by 4.5 million barrels, three times more than analysts had expected. The mixed report did not help resolve an ongoing battle between a group of traders who believe oil prices have more room to rise after two days of record-setting gains and those who think prices will fall as supplies rise while demand fades. Specifically, one group of traders believes investors will continue to be attracted to the oil market by the falling U.S. dollar, which makes oil more attractive to foreign investors. The other group believes rising supplies and the falling demand noted in a number of recent reports means that oil prices will eventually decline. Meanwhile, U.S. retail gasoline prices jumped 3.3 cents Thursday to an average of $3.086 a gallon (3.8 liters), according to the Oil Price Information Service and industry group AAA. Gasoline prices, which usually lag the futures market, are moving higher partly due to oil's rise but also because stations in many parts of the country are starting to switch from winter-grade gasoline to the more expensive summer-grade blends. Summer-grade gasoline, which has additives designed to reduce pollution, trades as much as 15 cents higher per gallon than winter-grade gasoline on the futures market. The Energy Department and many analysts expect gasoline prices to peak this spring well above last May's record of $3.227 a gallon. Estimates of how high prices will go range from $3.40 to almost $4. However, Thursday's report showed that U.S. gasoline inventories are at a 14-year high, which could limit price increases this spring.
