NEW YORK (Dow Jones)--Oil futures held onto previous gains after a report said U.S. oil inventories fell more than expected last week.
Light, sweet crude for August delivery traded up $1.03, or 1.1%, to $98.53 a barrel on the New York Mercantile Exchange. September Brent crude on ICE Futures Europe exchange rose $1.22, or 1%, to $118.28 a barrel.
Trade of the August contract was thin, with the contract set to expire at the close of trading Wednesday. The more active September contract recently traded up $1.04, or 1.1%, to $98.88 barrel on the Nymex.
Futures remained in positive territory, little changed from earlier levels, after the Department of Energy said oil inventories last week fell 3.7 million barrels. Although the draw was bigger than expected, it was offset somewhat by increases in refined-product inventories.
"It's kind of a mixed bag," said Jason Schenker, president of the Austin consultancy Prestige Economics. "If you look at the net (change) of products versus crude, it didn't move the needle that much."
The DOE said gasoline inventories rose 800,000 barrels last week, while stocks of distillates, including heating oil and diesel, jumped 3.4 million barrels.
Analysts expected oil inventories last week to fall 1.4 million barrels, according to a survey by Dow Jones Newswires. Gasoline stocks were seen falling 200,000 barrels, while distillate stocks were seen rising 1.2 million barrels.
Traders look to the weekly inventory report for clues on U.S. supply and demand levels. Although a drop in crude futures typically lifts prices because it signals strong demand from refiners, an opposite change in product inventories can blunt the market's response.
The DOE said inventory levels in the U.S. Strategic Petroleum Reserve were unchanged. The U.S. will be releasing about 30 million barrels of oil from strategic stocks as part of a global release of twice that amount. Some of those barrels are expected to hit the market later this month.
Crude futures were also lifted by the weaker dollar, which fell against the euro on rising hopes that European leaders would find a way to contain the euro-zone debt crisis at a crucial summit Thursday.
Oil prices have closely tracked the currency markets in recent days as the European debt crisis continues to dominate headlines. Market participants are looking to the euro-zone discussions for guidance on the dollar's movements and for signs that the continent is containing a crisis that has sapped economic growth and dimmed expectations of crude demand.
The euro recently traded up 0.4% at $1.42110. A weaker dollar lifts oil prices by making the dollar-denominated commodity cheaper for holders of other currencies.
Front-month August reformulated gasoline blendstock, or RBOB, recently traded up 1.66 cents, or 0.5%, to $3.1315 a gallon. August heating oil added 1.86 cents, or 0.6%, to $3.1166 a gallon.