(Updates prices, paragraph 2)
By Rebekah Kebede
NEW YORK, March 26 (Reuters) - Oil climbed over $106 a
barrel on Wednesday after a U.S. government report showed
larger-than-expected drops in fuel stocks and declining fuel
production in the world's top oil consumer.
U.S. crude oil futures <CLc1> hit a session high of $106.20
and settled at $105.90 a barrel, a $4.68 gain for the day.
London Brent <LCOc1> added $3.39, settling at $103.99.
Crude oil hit its record high of $111.80 on March 17.
"Today's numbers are a nice bullish surprise and come on a
day when the other commodities are picking up as well," said
Mike Zarembski, analyst at optionsXpress in Chicago.
Gasoline inventories fell by 3.3 million barrels as U.S.
refiners slowed production to the lowest levels since October
2005, when several refineries were knocked offline by
hurricanes Katrina and Rita, U.S. Energy Information
Administration data showed.
The drop in gasoline stocks was more than triple the
800,000-barrel decline expected. Distillates dropped 2.2
million barrels, also more than forecast.
Crude oil inventories were unchanged last week, which
bucked expectations for an increase of 1.7 million barrels.
"Lower-than-expected imports for crude, coupled with a
major drop-off in refinery runs, driven by weak crack spreads
and maintenance, were the catalyst for lower builds for crude
and a much bigger-than-expected drop in gasoline inventories,"
said Chris Jarvis, senior analyst at Caprock Risk Management in
Hampton Falls, New Hampshire.
Even before the report, oil rose as a weakening U.S. dollar
prompted some investors to shift money back into commodities
and a 24-hour strike disrupted operations at French ports.
The dollar slid, boosting oil and other commodities, after
data showed new orders for long-lasting U.S.-made manufactured
goods unexpectedly fell 1.7 percent during February.
Gold, which like oil is used as a hedge against inflation,
hit a one-week high and industrial metals such as copper also
gained.
French port and dock workers started the strike at French
state-owned ports to protest government plans to privatize the
loading activities of seven out of nine of the public ports.
The strike lifted gas oil futures, the benchmark for diesel
and heating oil in Europe, traders said. Gas oil was up 4
percent at $945.75 a tonne.
Analysts said a workers' strike in Gabon that had halted
60,000 barrels of daily output from a Shell subsidiary in the
West African nation also encouraged oil's gains.
There was also a possibility that Iraq's oil output could
be affected by violence in the country's south.
Oil production and exports from the southern oilfields
could be disrupted in three days if workers cannot reach their
offices due to fighting in Basra, a Southern Oil Company
official said.
(Additional reporting by Alex Lawler, Fayen Wong, and
Chikafumi Hodo; Editing by David Gregorio)
