UPDATE 8-Oil slips on inventory rise but weather supports

* EIA report shows surprise rise in crude oil inventories

* Carib weather system on track for Gulf; Shell evacuates

* Coming Up: Fed’s Bernanke at Senate at 2 p.m.
(Recasts, updates prices, market activity, changes byline and moves
dateline from previous LONDON)

By Robert Gibbons

NEW YORK, July 21 (BestGrowthStock) – Oil prices slipped on Wednesday,
falling from a 3 1/2-week high after data showed U.S. crude
inventories unexpectedly rose last week, but a tropical weather
system approaching the Gulf limited losses.

Commercial U.S. crude inventories rose 360,000 barrels in the
week to July 16 to 353.46 million barrels, against a forecast stocks
would be down 1.4 million barrels, the U.S. Energy Information
Administration reported. [EIA/S]

U.S. crude oil for September delivery fell 80 cents to $76.78 a
barrel by 1:47 p.m. EDT (1747 GMT), trading from $76.59 to $78.57.

Heating oil prices fell below $2 a gallon immediately after the
data showed heating oil and total distillate stockpiles rose.
Gasoline prices also pulled back after the inventory report showed
rising stockpiles.

“This report was negative across the board, with the unexpected
build in crude stocks and the build in products too as refineries
ramped up production,” said Mike Zarembski, senior commodities
analyst at Optionsxpress in Chicago.

Before the EIA data, optimism about the economy reflected in
rising equities markets had lifted oil prices to $78.57, building on
the previous two days of gains.

The reversal after the inventory data pulled oil prices back
below two key technical resistance points: the 200-day moving average
at $77.58, and a trend line connecting several intraday peaks going
back to April 6.

London ICE Brent futures (LCOc1: ) fell 26 cents to $75.96.

Rising crude oil imports, up 696,000 barrels per day to 9.94
million bpd, helped offset a 1 percentage point rise in refinery
capacity utilization.

The increased refinery use pushed gasoline inventories up 1.12
million barrels, more than the forecast build of 900,000 barrels.
Distillate stocks jumped up 3.94 million barrels, much more than the
forecast rise of 1.7 million barrels.
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Graphic:http://link.reuters.com/hun72k

To see the latest storm tracks see:
http://www.skeetobiteweather.com/

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STORM WORRIES

After the inventory report crude prices rose more than 30 cents
off the intraday low of $76.59 on news Shell Oil Co (RDSa.L: ) has
begun pulling nonessential staff from Gulf of Mexico operations
because of the threat of a possible tropical storm. [ID:nN2196134]

Although the U.S. National Hurricane Center lowered to 60 from 70
percent the chance a tropical wave moving across Hispaniola on
Wednesday would form a tropical depression, the storm remained on a
projected course that would take it toward the main Gulf of Mexico
oil platforms. [ID:nN21106538]

“Crude futures fell on the EIA data showing builds in crude and
product inventories, but are now paring losses on fears of the
possibility of a storm hitting the Gulf of Mexico,” said Andy Lebow,
broker at MF Global in New York.

Most weather models projected the system would cross South
Florida and the eastern Gulf of Mexico before hitting the Central
Gulf Coast.

Results from U.S. investment bank Morgan Stanley (MS.N: ) (Read more about the money market today. ) and
diversified U.S. manufacturer United Technologies Corp. (UTX.N: ) both
helped support sentiment, traders said, but U.S. stocks (Read more about the stock market today. ) seesawed near
parity as traders waited for Federal Reserve Chairman Ben Bernanke to
appear before a Senate committee at 2 p.m. EDT (1800 GMT). [.N]

Investing Research

(Additional reporting by Gene Ramos and Edward McAllister in New
York, David Turner and Joe Brock in London and Alejandro Barbajosa in
Singapore; Editing by Sofina Mirza-Reid)

UPDATE 8-Oil slips on inventory rise but weather supports