* U.S. distillates stocks fall, crude rises - EIA
* Funds tell CFTC not to blame for volatility
(Recasts, adds settlement prices, byline)
By Matthew Robinson
NEW YORK, Aug 5 (Reuters) - Oil rose on Wednesday,
bolstered by a drop in U.S. distillate inventories and optimism
that a slowdown in U.S. private job losses in July could signal
a gradual turnaround in the economy.
U.S. crude <CLc1> settled up 55 cents to $71.97 a barrel,
with gains in heating oil futures leading the energy complex
higher. London Brent crude <LCOc1> rose $1.23 to end at
$75.51.
U.S. inventories of distillates -- which include heating
oil as well as key fuels for industry like diesel -- fell by
1.0 million barrels last week, according to the U.S. Energy
Information Administration. []
Distillate demand over the four weeks to July 31 rose to
nearly 3.4 million barrels per day, up from 3.3 million bpd in
the previous report, although still down 7.9 percent from
year-ago levels.
"In today's EIA report, we saw distillate inventories drop
and demand increase, I think that has boosted heating oil,"
said Gene McGillian, analyst for Tradition Energy in Stamford,
Connecticut.
U.S. heating oil futures <HOc1> settled up 2.92 percent,
with traders citing higher distillate demand outside the United
States as adding further support.
The distillate draw helped counter a 1.7 million barrels
rise in U.S. crude inventories last week, against forecasts for
an 800,000-barrel build, as refinery cut back on utilization
rates.
Further strength came as markets eyed the brighter side of
U.S. economic data, with investors hoping a slower pace of U.S.
private job losses in July hinted at gradual improvement in the
economy. The number of U.S. jobs lost in the private sector
fell in July but firms increased planned layoffs, according to
the ADP Employer Services report. []
The data prompted investors to sell the dollar and put
money into riskier plays, boosting commodities denominated in
the greenback. []
"The dollar weakness is the only thing out there that is
supportive. But the bulls are trying to take control of the
market and test $72," said Dan Flynn, analyst at PFGBest
Research in Chicago.
Energy markets have been looking to broader economic data
for signs of an end to the recession and a potential rebound in
oil demand.
Optimism has helped lift crude from below $33 a barrel in
December, well off record highs near $150 reached in July
2008.
Further support has come from a series of output reductions
agreed by the Organization of the Petroleum Exporting Countries
(OPEC) last year.
OPEC member Kuwait said the producer group would likely
keep output targets unchanged when it next meets in September
if prices stay at current levels. []
The wide price swings in oil in recent years have spurred
calls for greater market regulation.
The U.S. Commodity Futures Trading Commission, which
oversees regulated futures exchanges, held its third and final
hearing on Wednesday into whether it should limit how many
futures contracts hedge funds, investment banks and other
speculators can control to help limit big movements in energy
prices.[]
Funds that invest heavily in the sector argued that they
were not responsible for the wild volatility in energy prices,
while CFTC Chairman Gary Gensler reiterated the commission
should "seriously consider" setting position limits.
(Reporting by Matthew Robinson, Robert Gibbons, and Gene
Ramos in New York; Joe Brock in London; Editing by Marguerita
Choy)
