Oil up on U.S. gasoline draw, equities weigh

Crude oil held gains of nearly 2 percent on Wednesday as a sharp decline in U.S. gasoline stocks offset worries about economic growth, Reuters reported. Prices rose in early trade, lifted by initial gains in the U.S. stock market and a late Tuesday report by American Petroleum Institute showing a steep drop in domestic gasoline inventories last week. Later, the market pared gains when the U.S. Energy Information Administration confirmed the gasoline drawdown, but also reported a steep build in crude stockpiles. A downturn on Wall Street in New York also weighed on prices, as sentiment wavered after pushing higher on strong earnings. Worries about the euro zone debt crisis and mixed U.S. economic data have kept investors cautious for much of August. In London, ICE Brent for October delivery gained $1.78 at $110.91 a barrel, having traded as high as $111.74, the highest since Aug. 4. It slipped to $98.74 on Aug. 9, the lowest since February, on concern about an economic slowdown. U.S. crude for September delivery was up 95 cents at $87.60. Brent's premium against the U.S. October crude contract rose above $23, after closing $22.29 on Tuesday. The WTI/Brent spread hit a record $26.08 on Aug. 9. Improved risk sentiment pushed the Relative Strength Index of U.S. crude to 43.96 percent, after dipping to 41.25 on Tuesday. Recent buying has lifted the index from the 20.16 low hit on Aug. 9, well below the 30 level that signifies oversold conditions. In London, ICE Brent's RSI also improved to more than 48, from 44.38 on Tuesday. U.S. gasoline stockpiles shrank 3.5 million barrels last week, data from the U.S. Information Administration showed. The drawdown was more than the forecast for a 1.3 million barrel drawdown in a Reuters poll. That overshadowed an unexpected 4.2 million barrel rise in U.S. crude oil inventories, which was against the forecast for a drawdown of 800,000 barrels. Commercial crude stocks rose as the U.S. government continued releasing supplies from the Strategic Petroleum Reserve, part of a coordinated effort with members of the International Energy Agency to cover barrels lost due to fighting in Libya. A drop in refinery utilization and higher imports further contributed to higher crude stocks, EIA data showed. A meeting between the French and German leaders on Tuesday did not calm investor concern about Europe's sovereign debt problems and some analysts said the worries could again prove a drag on oil prices.