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Oil prices move higher

LONDON - Oil prices extended gains on Thursday, pushed upwards by a surprise drop in US motor fuel reserves, dealers said.

New York’s main contract, light sweet crude for April delivery, gained 78 cents to 43.28 dollars a barrel.

Brent North Sea crude for April was up 52 cents to 44.85 dollars.

Prices rallied Wednesday, gaining more than two dollars in New York, as the market reacted to news of sliding gasoline (petrol) reserves in key energy consumer the United States.

“Crude prices surged higher yesterday and continued to build on those gains (on Thursday) after the weekly EIA report showed large draws in gasoline amid a rise in demand,” said Sucden Financial Research analyst Nimit Khamar.

The US government’s Energy Information Administration (EIA) said Wednesday that gasoline stocks fell 3.4 million barrels in the week ending February 20. The market had expected no change.

This jump in prices is likely to be short-lived, warned Victor Shum, a Singapore-based analyst with energy consultancy Purin and Gertz.

“It would be premature to say that oil now has turned the corner because the weak economy remains a threat to the oil market but the downward momentum in oil pricing has been broken,” Shum said.

Reserves of gasoline are moving into focus before the US summer holiday driving season, which starts in May.

The EIA added that crude reserves rose 700,000 barrels, much less than analyst forecasts for an increase of 1.2 million barrels.

“The rest of the report was also supportive as crude stocks rose by 700,000 barrels, less than expected, while stocks at Cushing fell by 400,000 barrels,” Khamar said.

Cushing, Oklahoma is the delivery point for crude traded on the New York Mercantile Exchange (Nymex).

Despite gains on Thursday, oil prices have slumped since hitting record highs above 147 dollars in July as the global economic slowdown drains demand.

The Organization of the Petroleum Exporting Countries (OPEC), which pumps about 40 percent of the world’s oil, announced late last year output cuts of more than four million barrels per day in a bid to reverse tumbling prices.