"Refiners slowed production and did a lot of maintenance on the expectation that this was going to be a lousy year for demand," said Fred Rozell, retail pricing director at Oil Price Information Service. "It turns out it wasn't so bad."
Yet it's still pretty bad. Before the most recent government report on demand, gasoline supplied to the market was down 3 percent, and prices have still been cheaper than they were three years ago.
Pump prices added a half cent overnight to a new national average of $2.679 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gas has jumped nearly 37 cents in a month.
Meanwhile, oil rose above $70 a barrel after a key government report said that crude held in U.S. storage houses fell for the third straight week.
Benchmark crude for July delivery added 56 cents to settle at $71.03 on the New York Mercantile Exchange. Most of the trading already has switched to the August contract, which added 54 cents to settle at $71.70 a barrel.
The Energy Information Administration report said gasoline reserves grew last week by 3.4 million barrels, or 1.7 percent, to 205 million barrels. Analysts expected stockpiles of the motor fuel to rise by 650,000 barrels.
Demand for gasoline was up 1.1 percent from last year, averaging nearly 9.3 million barrels a day over the four weeks ended June 12.
Crude inventories fell last week by 3.9 million barrels, or 1.1 percent, to 357.7 million barrels, the report said. Despite the drop, U.S. inventories are still bloated with the most oil than they've held in nearly 16 years.
Oil prices this week have come off eight-month highs near $73 a barrel amid some signs that the U.S. economy, while past the worst of a severe recession, is still weak. Crude prices have dropped with equities markets this week, and they continued to fall Wednesday though the dollar was week.
Because barrels are priced in U.S. currency, oil tends to rise when the dollar falls.
In other Nymex trading, gasoline for July delivery tumbled 3.85 cents to settle at $2.0326 a gallon and heating oil added 3.8 cents to settle at $1.863. Natural gas for July delivery gained 12.4 cents to settle at $4.253 per 1,000 cubic feet.
In London, Brent prices added 61 cents to settle at $70.85 a barrel on the ICE Futures exchange.
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Associated Press writers Ernest Scheyder in New York, Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
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