* U.S. gasoline stockpiles unexpectedly drop -EIA
* For a short-term technical outlook on oil:
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* Coming Up: Euro zone economic sentiment index; 0900 GMT
(Adds background on U.S. supplies, comment, updates prices)
By Alejandro Barbajosa
SINGAPORE, April 29 (Reuters) - Oil was steady above $83 on
Thursday as energy markets shrugged off credit rating
downgrades for southern European countries, encouraged by signs
that U.S. demand will improve this summer.
Standard & Poor's on Wednesday cut Spain's rating one notch
a day after lowering Greece to junk status and downgrading
Portugal, raising concerns of spreading sovereign credit risk.
[]
But the Federal Reserve left interest rates near zero on
Wednesday and gave an upbeat assessment of the U.S. economy.
Crude was also getting support from expectations that
gasoline use in the United States will accelerate during the
driving season between late May and early September.
Demand in the world's top gasoline consumer jumped 3.1
percent in the past four weeks from a year earlier, causing an
unexpected drop in gasoline stockpiles last week, government
statistics showed on Wednesday. []
"The market is too optimistic about the whole situation,"
said Clarence Chu, an energy trader at Hudson Capital Energy in
Singapore, adding that its resilience to the European debt
crisis was "quite bullish."
"People saw all the downgrades coming since a month ago,
but oil is still quite strong," Chu said. "If you look at the
charts for the past week or so, it seems like the market is
quite comfortable around the $84 level."
U.S. crude for June delivery <CLc1> shed 5 cents to $83.17
a barrel at 0538 GMT, after climbing almost 1 percent on
Wednesday, boosted by rising stock markets. Prices are about $4
lower than an 18-month high above $87 reached on April 6.
For a technical chart on U.S. crude prices, see:
http://graphics.thomsonreuters.com/gfx/WT_20102904084607.jpg
ICE Brent crude for June <LCOc1> slid 6 cents to $86.10,
keeping a $3 premium to front-month U.S. crude after stockpiles
at the Cushing, Oklahoma, delivery point for West Texas
Intermediate crude climbed for a sixth consecutive week.
Total U.S. crude stockpiles rose by 1.9 million barrels in
the week to April 23, the Energy Information Administration
said on Wednesday, more than a forecast 1-million-barrel
increase.
FULL OF CONTRADICTIONS
An oil glut in the U.S. Midwest is creating distortions in
oil futures markets. The front-month WTI contract, which
usually trades at a premium to ICE Brent, this week has reached
its biggest discount against the European benchmark in eight
months.
"The U.S. (oil) market is full of contradictions and
dislocations at the moment," said Barclays Capital analysts
headed by Paul Horsnell in a weekly note, describing it as "a
combination of pockets of tightness and pockets of surplus."
"In short, the overall crude inventory surplus is still
falling, but it has become entirely concentrated in just one
region of the country," Barclays said.
Abundant supplies in the Midwest are also increasing
incentives to stock more oil by depressing the value of prompt
crude relative to contracts for later delivery. This market
structure, known as contango, has shown discounts of about
$2.50 for the front month WTI contract to the second month in
the past two days.
But total U.S. crude inventories have been rising by less
than the seasonal norm, according to Barclays. And gasoline
stocks fell by 1.2 million barrels last week, compared with
estimates for an 800,000 barrel gain.
"The inventory report is not as bearish," Chu said. "There
is a surprise draw in gasoline."
Distillates including heating oil and diesel rose by a
larger-than-expected 2.9 million barrels, while the country's
total oil demand climbed 1 percent from a year earlier,
according to the EIA.
"The driving season in the U.S. is going to be a big
indication of whether demand is actually recovering," Chu said.
The oil market was paying little attention to currency
moves on Thursday, when the dollar weakened by about 0.2
percent against a basket of currencies as the euro recovered
from one-year lows a day earlier. []
Europe continued to haggle over a bailout package for
Greece. The euro was beaten to a one-year low on Wednesday as
Germany balked at the aid plan, but recovered in late U.S.
trade on reports that the rescue may be much bigger than
anticipated and could be spread over several years.
Oil traders were also following the debate over U.S.
financial regulation in Congress.
A three-day U.S. Senate standoff over efforts to overhaul
financial regulation ended on Wednesday as Republicans dropped
efforts to block a Democratic bill in exchange for a handful of
concessions. []
(Editing by Ed Lane)
