NEW YORK The price of oil fluctuated above $114 a barrel Wednesday, propped up by worries about tropical storms and heightened tension between Russia and the West, but hampered by a massive increase in U.S. crude supplies last week.
The Energy Information Administration, an arm of the U.S. Energy Department, said crude inventories rose by a hefty 9.4 million barrels in the week ended Aug. 15, after a big gain in imports. The figure came in much higher than the average analyst forecast for a 1.7 million-barrel increase, according to energy information provider Platts.
U.S. fuel supplies are not abundant across the board, though. Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels, the EIA said, while distillate inventories which include heating oil and diesel fuel rose by less than expected.
Gasoline and heating oil prices drifted higher by afternoon trading on the Nymex.
And given that the hurricane season is not even halfway over, traders remain nervous about the possibility of a storm striking oil facilities in the Gulf of Mexico. Also keeping a floor under prices is doubt over Russia's adherence to a ceasefire with Georgia, and escalating tension between Russia and the United States.
"Consumers can take some solace in the sell-off, but there are more supportive factors down the road here," said John Kilduff, senior vice president of risk management at MF Global LLC in New York.
Light, sweet crude for September delivery rose 9 cents to $114.62 a barrel in afternoon trading on the New York Mercantile Exchange, after rising as high as $117.03 before the inventory data was released and then falling as low as $112.61. The September contract expires on Wednesday.
Since mid-July, crude prices had pulled back by about $35, or nearly 25 percent, from their July 11 trading record of $147.27. The retreat arrived as the dollar recovered ground against other major currencies, and as evidence emerged that Western Europe's and Japan's economies are weakening alongside that of the United States which could put a damper on global energy demand.
Gasoline demand averaged about 9.5 million barrels per day over the last four weeks, or 1.6 percent lower than the same period last year, the EIA said.
As crude prices have fallen, so have gasoline prices. The average U.S. retail price for a gallon of gasoline was at $3.717 on Wednesday, down more than a penny from Tuesday and down nearly 10 percent from the July 17 record of $4.114, according to auto club AAA, Oil Price Information Service and Wright Express.
But in addition to hurricane season and political tensions, developing economies are still expected to boost their energy use in the coming years. Because of these factors, many analysts say the price of oil still more than 60 percent higher than a year ago appears to be consolidating at current levels.
One supportive factor for prices Wednesday was the slim possibility of a trajectory change for Tropical Storm Fay, which hugged the Florida coast Wednesday morning. Fay has not approached oil and gas platforms in the Gulf of Mexico, but a couple computer models predict that the storm could bounce back toward the Gulf.
The AccuWeather.com Hurricane Center said Wednesday it predicts Fay will make a third landfall Thursday morning along the Southeast coast of Florida. The forecasters said that a "narrow window exists" for the storm to turn into a hurricane.
MF Global's Kilduff and Peter Beutel of Cameron Hanover also pointed to thunderstorms in the eastern Atlantic that some traders are betting will develop into tropical storms.
Meanwhile, Russia stated on Wednesday that it believes U.S. plans to place a missile defense base in Poland are aimed at weakening Russia, after the United States said the defense system is for protecting the U.S. and Europe from future attacks from states like Iran. Russia said its response will go beyond diplomacy.
President Bush on Wednesday offered clear support for Georgia, which has been attacked by Russia. The conflict between Russia and Georgia has been worrying the energy markets because a key pipeline runs through Georgia.
And with the Organization of the Petroleum Exporting Countries meeting in early September, supply concerns could rise if countries decide to lower their output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.
Heating oil futures rose 1.04 cent to $3.1341 a gallon in afternoon trading on the Nymex, while gasoline futures rose 0.46 cent to $2.8685 a gallon. Natural gas futures rose 8.9 cents to $8.065 per 1,000 cubic feet.
In London, October Brent crude fell a penny to $113.24 a barrel on the ICE Futures exchange.