Oil rises to near $75 amid U.S. crude supply drop

Oil prices rose to near $75 a barrel Thursday after a report showed U.S. crude inventories fell more than expected, suggesting demand may be improving.

By early afternoon in Europe, benchmark oil for October delivery was up 29 cents at $74.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 58 cents to settle at $74.67 on Wednesday.

Crude inventories fell 7.3 million barrels last week, the American Petroleum Institute said late Wednesday. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of 730,000 barrels. Inventories of gasoline and distillates rose, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data -- the market benchmark -- later Thursday.

Despite last week's decrease, U.S. oil supplies are at a 30-year high and that weighs on crude prices, energy consultancy Cameron Hanover said.

The Energy Department said Wednesday it expects the December contract to settle at $78 a barrel and the December 2011 contract to settle at $84 as a jump in demand from China helps offset slowing growth in developed countries. China will likely consume an average of 9.5 million barrels a day next year, up 46 percent from 2002, the department said.

"It seems all the eggs are being placed in the emerging markets," said the Schork Report, edited by energy trader and consultant Stephen Schork. "Given the tendency for bubbles and crashes in that region, we would remain very cautious."

The Organization of Petroleum Exporting Countries, OPEC, made a downward revision of 100,000 barrels a day of demand for its crude this year to 28.6 million barrels a day.

In its monthly oil market report, the Vienna-based group also saw 2011 demand for its crude down by 100,000 barrels a day to a daily 28.8 million barrels, 0.2 million barrels higher than in 2010.

For global oil demand, OPEC expects growth of 1 million barrels a day both in 2010 and 2011.

"Global oil demand was higher than expected in the first half of the year, supported by stimulus packages in key consuming countries," OPEC said. "With these winding down, demand in the second half is expected to move lower."

In other Nymex trading in October contracts, heating oil rose 0.96 cent to $2.0913 a gallon and gasoline gained 0.81 cent to $1.9475 a gallon. Natural gas for October delivery advanced 1.2 cents to $3.826 per 1,000 cubic feet.

In London, Brent crude was down 7 cents at $78.10 on the ICE Futures exchange.