Oil rises above $87 after US crude supply drop

Oil prices rose above $87 a barrel Wednesday in Asia after a report showed U.S. crude supplies unexpectedly fell last week, suggesting demand may be improving.

Benchmark crude for March delivery was up 47 cents at $87.41 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost 54 cents to settle at $86.94 on Tuesday.

In London, Brent crude gained 42 cents to $100.94 a barrel on the ICE Futures exchange.

The American Petroleum Institute said late Tuesday that crude inventories fell 558,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 2.4 million barrels. Inventories of gasoline rose 3.2 million barrels and distillates fell 538,000 barrels, the API said.

The Energy Department’s Energy Information Administration reports its weekly supply data later Wednesday.

“The API report was encouraging,” energy consultant The Schork Report said. “All told, this was the most bullish report the API has released in weeks.”

In other Nymex trading in February contracts, heating oil rose 0.5 cent to $2.74 a gallon and gasoline gained 1 cent to $2.50 a gallon. Natural gas futures for March delivery were up 0.5 cent at $4.05 per 1,000 cubic feet.