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Oil prices drop on mixed US supply report

Oil prices on Wednesday finished lower after a US energy inventory report showed a drop in crude supplies but higher stocks of gasoline and other refined products.

NEW YORK: Oil prices on Wednesday finished lower after a US energy inventory report showed a drop in crude supplies but higher stocks of gasoline and other refined products.

US benchmark West Texas Intermediate for July delivery slipped two cents to US$102.64 a barrel on the New York Mercantile Exchange.

European benchmark Brent oil for July delivery dropped 42 cents to US$108.40 a barrel in London.

The US Department of Energy said that American commercial crude stocks fell by 3.4 million barrels last week, far above expectations for a fall of 100,000 barrels..

But gasoline stocks rose by 200,000 barrels and distillate stocks jumped two million barrels; the latter was far above the 700,000 rise projected by analysts.

The increase in gasoline stocks suggests weak demand during the Memorial Day weekend, which was the unofficial kickoff of the annual summer driving season, said Gene McGillian, broker and analyst at Tradition Energy.

"We didn't see a significant increase in gasoline demand, which makes you wonder if the fundamental picture is really strengthening," he said.

US economic data was mixed. Payrolls company ADP reported 179,000 new jobs in May, down 36,000 from April and the lowest count in four months.

But the Institute for Supply Management said its purchasing managers index (PMI) for the services sector rose to 56.3 in May from 55.2 in April, indicating accelerating growth.

"Conditions are improving in the US, but they're not galloping away," McGillian said. "They're just improving slowly, so that's also taking away support for higher prices."

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