Oil price climbs above $90 on stronger US demand

NEW YORK — The price of oil climbed above $90 per barrel for the first time since May after the government said U.S. oil demand is on the rise.

The Energy Information Administration reported Wednesday that average oil demand increased last week in the U.S. for the third week in a row. Oil demand had been down most of the year, when compared with 2011, as manufacturing activity slowed and drivers cut back on travel.

“We keep talking about the slow economy, but the market is seeing some improved oil demand today,” said Phil Flynn, an analyst at Price Futures Group.

Benchmark U.S. crude rose by 36 cents to $89.58 per barrel in New York. It hit $90.04 per barrel earlier in the day, the highest since May 30.

Brent crude, which sets the price for oil imported into the U.S., rose $1.02 to $104.97 per barrel in London.

EIA’s weekly petroleum report also noted a surprise drop in gasoline supplies last week, as refineries pulled back on production. Oil supplies also fell, though less than what analysts had expected.

Meanwhile, China’s biggest companies warned of sharp drops in profits this year. That country’s economy is still growing at a much faster clip than Western nations, including the U.S., but Premier Wen Jiabao has warned that the pace of growth will be unstable. China is the second-largest oil consumer in the world behind the U.S., and a slowdown in its economy could cut world oil demand.

U.S. homebuilders broke ground last month on the most homes and apartments in nearly four years, according to the Commerce Department. The report provided more evidence that the housing market is beginning to recover.

Retail U.S. gasoline prices rose 2 cents to a national average of $3.426 per gallon, according to AAA, Wright Express and Oil Price Information Service. The price of regular is up an average 10 cents a gallon since the beginning of July. It’s still 51 cents per gallon cheaper than it was during the first week of April.

In other futures trading, heating oil rose by 1.95 cents to $2.8617 per gallon, while wholesale gasoline increased by 4.65 cents to $2.8915 per gallon. Natural gas rose 12.1 cents to $2.9170 per 1,000 cubic feet.