Oil price finishes higher after bigger than expected drop in crude supplies

NEW YORK, N.Y. – The price of oil finished higher Friday after the U.S. Energy Department’s Energy Information Administration reported a much bigger drop in American crude supplies than analysts expected.

After trading lower much of the day, benchmark crude for February delivery closed up 17 cents at US$93.09 a barrel on the New York Mercantile Exchange.

The EIA report said crude supplies fell by 11.1 million barrels, or three per cent, last week. Analysts had expected a drop of just a million barrels.

Oil supplies shrank as crude imports fell off by almost a million barrels a day last week. At the same time, supplies at the crucial hub for domestic crude at Cushing, Okla., stayed up at near-record levels. Overall U.S. crude inventories are about nine per cent above year-ago levels.

There were also some encouraging economic reports Friday that raised hopes for higher oil demand.

The Labour Department reported U.S. employers added 155,000 jobs in December, a steady gain that shows hiring held up during tense negotiations to resolve the fiscal cliff issue. The solid job growth wasn’t enough to push down the unemployment rate, however, which remained at 7.8 per cent last month.

Also, the Institute for Supply Management said U.S. service firms’ activity expanded in December by the most in nearly a year, driven by a jump in new orders and hiring. The index measures growth in industries that cover 90 per cent of the workforce, including retail, construction, health care and financial services.

Brent crude, used to price international varieties of oil, finished 83 cents lower at US$111.31 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex, wholesale gasoline lost three cents to end at US$2.76 a U.S. gallon (3.79 litres), heating oil fell less than a penny to finish at US$3.02 a gallon and natural gas rose nine cents to end at $3.29 per 1,000 cubic feet.