Oil hits 10-month high on low US fuel stocks

US oil topped $70 a barrel on Thursday for the first time in nearly 10 months following a sharp drop in gasoline stocks during peak summer driving demand in the world's biggest consumer.
Adding support was a decline in crude oil stockpiles during the same week in Cushing, Oklahoma - the delivery point for US crude futures - which drew traders to raise US oil prices relative to the London benchmark.
US crude settled up 60 cents at $69.57 a barrel, the highest settlement since late August 2006, after having broken well over $70 earlier in the session for the first time since September 2006.
London Brent crude oil, which has been seen as a better gauge of global oil prices recently, settled down 1 cent at $70.52 a barrel. US crude prices have been on the rise since Wednesday when a report from the Energy Information Administration showed a slowdown in gasoline imports drained US inventories of motor fuel by 700,000 barrels last week, countering market expectations of a 1.2 million barrel rise.
The data also showed inventories of crude at Cushing, Oklahoma, fell by 1.4 million barrels last week even as nation-wide crude stocks rose 1.6 million barrels to a fresh nine-year high.
"Oil prices have moved higher on a supportive set of US oil inventory data" said Barclays Capital. "The rapid decline in Cushing crude oil stocks suggests further gains for WTI relative to Brent crude."
US crude has been trading at an atypical discount to Brent since February, weighed down by higher inventories in the Midwest after a spate of refinery outages cut regional demand for the fuel feedstock.
"Last week, lower refinery runs were bullish; this week higher refinery runs are bullish," said Olivier Jakob of Petromatrix. EIA data also showed a year-on-year deficit of distillate stocks, which include heating oil, deepened after supplies fell 2.3 million barrels. Both gasoline and distillate inventories in the US are about 6 percent below a year ago.
"The fall in gasoline stocks is due mainly to a lack of imports, not domestic production, which has been ramping up," said Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia.
"With the refineries coming back online, it seems unlikely that the inventories will keep falling." Oil, along with other commodity and financial markets, fell earlier this week on concerns that troubles in US mortgage securities could raise borrowing costs and make investors avoid higher-risk markets.