* U.S. distillates stocks fall, crude rises - EIA
* Funds tell CFTC not to blame for volatility
(Adds news on FSA meeting with oil industry in last paragraph,
updates dollar activity in ninth paragraph)
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 such as diesel -- fell by 1.0
million barrels last week, according to the U.S. Energy
Information Administration. []
Distillate demand during 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. The euro hit a fresh nine-month high against
the dollar, 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.
The UK Financial Services Authority and the UK Treasury also
met with oil industry representatives to discuss market
transparency and regulation, but issued no statement after the
encounter. []
(Reporting by Matthew Robinson, Robert Gibbons, and Gene Ramos
in New York; Joe Brock in London; Editing by Lisa Shumaker)
