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Oil hovers above $89 after US crude supply drop

Oil prices hovered above $89 a barrel Thursday in Asia after a report showed a bigger than expected drop in U.S. crude supplies,

suggesting demand could be improving.

Benchmark oil for October delivery was down 1 cent to $89.33 at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude jumped $3.32, or 3.9 percent, to settle at $89.34 on Wednesday.

In London, Brent crude for October delivery was steady $115.80 on the ICE Futures exchange.

The American Petroleum Institute said late Wednesday that crude inventories fell 3.0 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1.7 million barrels.

Inventories of gasoline decreased 871,000 barrels last week while distillates increased 4.0 million barrels, the API said.

The Energy Department’s Energy Information Administration reports its weekly supply data later Thursday.

Threats to oil supplies in the Gulf of Mexico by a string of violent storms also helped boost crude prices. The National Hurricane Center expects as many as 18 named storms this year, with as many as half of them at hurricane strength.

However, some analysts are concerned slowing global economic growth will hurt crude demand and send prices lower.

“The oil market is still an appealing asset class in a near zero interest rate environment,” energy consultant Ritterbusch and Associates said in a report. “But we still have difficulty constructing a bullish fundamental case for a market that’s likely to be dogged by weak demand.”

In other Nymex trading for October contracts, heating oil fell 1.0 cent to $3.07 per gallon and gasoline futures dropped 0.5 cent to $2.90 per gallon. Natural gas for October delivery slid 0.9 cent to $3.93 per 1,000 cubic feet.


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