* U.S. gasoline stocks dropped 3 mln bbls last week -API
* Crude prices top $87 for the first time since October
2008
* Coming Up: U.S. crude inventory report from EIA; 1430
GMT
(Updates prices)
By Alejandro Barbajosa
SINGAPORE, April 7 (Reuters) - Oil was steady on Wednesday,
trading near 18-month highs around $87 after a larger than
expected drop in U.S. gasoline stockpiles signalled fuel demand
was rebounding with an improving economic outlook.
U.S. crude for May <CLc1> gained 10 cents by 0503 GMT to
$86.94 a barrel, 15 cents shy of Tuesday's intraday peak of
$87.09, the highest price since October 2008. London ICE Brent
<LCOc1> climbed 14 cents to $86.29.
Gasoline inventories in the U.S. fell a
larger-than-expected 3 million barrels last week, the
industry-funded American Petroleum Institute (API) said on
Tuesday.
"We have recently seen some good economic data from the
United States, and the market should appreciate that there is a
strong correlation between oil and the economy," said Mark
Pervan, a senior commodities analyst at ANZ in Melbourne.
Tuesday's release of minutes from the Fed's last policy
meeting indicated the U.S. central bank could maintain
ultra-low interest rates for even longer than investors have
anticipated if the economic outlook worsens or inflation drops,
boosting confidence that demand for commodities will continue
to grow. []
"Oil has probably moved into a new trading range, with a
floor around $85 creating a bit of additional long buying,"
Pervan said. "The market will take the gasoline stockdraw as a
buying signal as we move into the driving season."
TENTH STRAIGHT GAIN
U.S. crude oil stockpiles increased less than expected,
according to the API, adding 1.1 million barrels in the week
ended April 2.
But inventories of distillates, comprising heating oil and
diesel, rose unexpectedly as refineries processed more crude,
the API said.
Government data on U.S. inventories last week will follow
on Wednesday at 10:30 a.m. EDT (1430 GMT) from the Energy
Information Administration (EIA).
Crude stockpiles were expected to have climbed 1.8 million
barrels for their 10th consecutive weekly gain, a Reuters
survey showed, while gasoline supplies probably fell by 800,000
barrels.
European shares hit an 18-month closing high on Tuesday,
even as gains were capped by doubts about Greece's ability to
emerge from its fiscal crisis.
Oil prices traded in a range of less than $15 and below $84
a barrel in the first quarter, surpassing that level on April 1
for the first time since 2008. Pervan put the top of the new
trading range at $90.
Members of the Organization of the Petroleum Exporting
Countries have signalled a preference for prices between $70
and $80.
For a Reuters column on the challenges that OPEC may face
as prices surpass that level, click []
In its latest monthly forecast, the EIA said world
petroleum consumption this year will rise by nearly 1.5 million
barrels per day, 10,000 bpd lower than its estimate last month,
from 2009's total to 85.5 million bpd this year.
[]
The 1.5 million bpd growth is the result of an expected
recovery in the global economy, with world gross domestic
product seen rising by 3 percent this year, the EIA said.
(Editing by Clarence Fernandez)
