London, UK – Oil steadied Thursday after setting a record high above US$115 a barrel earlier in the session as a drop in U.S. gasoline and crude inventories raised concern of tighter supply.
A U.S. government report on Wednesday showed a surprise drop in crude inventories and a larger-than-expected decline in stocks of gasoline. Demand for the motor fuel usually peaks in the summer.

“The helpful thing for the market is the further erosion in product stocks,” said Christopher Bellew, senior vice president at Bache Commodities. “Technically, the market still looks bullish.”

U.S. crude set a record of US$115.54 a barrel and by 1430 GMT was trading at US$114.98, up 5 cents. Oil has hit new peaks for three consecutive days. London Brent set a record of US$113.38.

Trade could be volatile due to the expiry of May U.S. crude options Thursday, dealers said.

Gasoline stocks in the United States fell by 5.5 million barrels in the latest week, the U.S. Energy Information Administration said, more than the 1.8 million barrel decline analysts expected.

“Summer driving season is approaching. And even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain,” said Jan Stuart at UBS.

“But before we get there, the stress already put onto the supply chain globally by middle distillate demand and supply dynamics is not still abating,” he said in a research note.

In the latest indication of strong demand for middle distillates, China’s top refiners were set to extend high imports into a sixth straight month.

PetroChina, China’s second-largest refiner, has bought 300,000 tons of gas oil for May, traders said.

The weakness of the dollar continued to attract investors into commodities to hedge against inflation and bet oil’s rally would help compensate for the shrinking value of dollar assets in their portfolios.

The euro retreated from a record high against the dollar on Thursday after Jean-Claude Juncker, the chairman of eurozone finance ministers, spoke out against the single currency’s rise.

By Alex Lawler, Reuters