Sam Fletcher
Senior Writer

HOUSTON, July 2 -- Crude prices hit new record highs July 2 and continued climbing in after-hours electronic trading after the Department of Energy reported a larger-than-expected fall in crude inventories.

"Oil continued its bullish trajectory, with two data points helping to drive crude above the $144/bbl mark for the first time. News that the European Central Bank is set to raise its benchmark rate (confirmed this morning) sent US investors looking for a hedge against the weakening US dollar. In addition, DOE reported that crude inventories fell for the sixth time in the last 7 weeks," said analysts in the Houston office of Raymond James & Associates Inc.

The same government report showed that an increase in refining activity to 89.2% of capacity continued to build gasoline supplies as demand declined just prior the July 4 US Independence holiday, which usually is a peak demand period. The DOE's Energy Information Administration reported commercial US crude inventories fell 2 million bbl to 299.8 million bbl in the week ended June 27, the lowest level since January and exceeding the Wall Street consensus of a 400,000 bbl draw. Gasoline stocks escalated by 2.1 million bbl to 210.9 million bbl in the same week. Distillate fuel inventories grew by 1.3 million bbl to 120.7 million bbl (OGJ Online, July 2, 2008).