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Oil hovers above $80 after US crude supply drop

business Updated: Aug 11, 2010 09:50 IST

Oil prices hovered above $80 a barrel on Wednesday in Asia after a report showed US crude supplies dropped last week, suggesting demand may be improving.

Benchmark crude for September delivery was up 6 cents at $80.31 a barrel at late morning Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost $1.23 to settle at $80.25 on Tuesday.

Oil has jumped above $80 a barrel several times in the last year but struggled to maintain that level for long amid doubts about the strength of the U.S. economy and demand for crude. The American Petroleum Institute said late on Tuesday that crude inventories fell 2.2 barrels last week against a drop of 2.4 million barrels forecast in an analyst survey by Platts, the energy information arm of McGraw-Hill Cos.

Inventories of gasoline also fell while distillates rose, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

"The crude price uptrend of the past month remains intact for now," Ritterbusch and Associates said in a report." Earlier Tuesday, the Federal Reserve said it will use money from its investments in mortgage securities to buy government debt on a small scale. That could help send long-term rates on mortgages and corporate debt slightly lower.

The Fed also said the pace of economic recovery is "likely to be more modest in the near term than had been anticipated," and that it would take more aggressive action to keep the recovery on track if needed.

In other Nymex trading in September contracts, heating oil rose 0.20 cent to $2.1274 a gallon, gasoline gained 0.90 cent to $2.0943 a gallon and natural gas jumped 2.8 cents to $4.325 per 1,000 cubic feet.

Brent crude was up 2 cents at $79.62 a barrel on the ICE futures exchange.