London: Oil handed back early gains to stand below $136 a barrel yesterday as US government data showed an unexpected increase in gasoline stocks, overshadowing a larger-than-expected fall in crude inventories.
US light crude for August delivery fell 50 cents at $135.54 a barrel by 1530 GMT, off highs of $138.28. London Brent crude was three cents down at $136.40.
The US Energy Information Administration said crude stocks fell 5.9 million barrels last week against expectations of a 1.8 million decline, while gasoline stocks rose by 900,000 barrels against expectations of a decline of 200,000 barrels. "It is a very bullish report with a little bearish news hidden in there," said Rob Kurzatkowski, futures analyst at optionsXpress in Chicago. "Gasoline is the weak link in the chain."
Drop in demand
The US data also showed a 2.1 per cent year-on-year drop in gasoline demand for the past four weeks, alongside a 1.8 per cent drop in total product demand.
Crude had rallied by more than $2 earlier in the session, partly recouping a hefty $5 drop in the previous session, after Iran said it had test-fired missiles that could reach Israel and US bases in the region.
Iran's missile tests at a time of increased tensions over its nuclear programme once again highlighted the geopolitical risks in the oil market.
"Of particular concern is the fact these missiles are not simply short to medium range," said Global Insight analyst Lawrence Poole.
Fresh concerns over supplies resurfaced after Libya said its output would fall by about 100,000 barrels per day due to maintenance on a pipeline.
Oil is up 42 per cent this year, boosted in part by investors seeking a hedge against inflation.
