Oil hovers above $85 after mixed US supply report

Oil prices hovered above $85 a barrel today in Asia after a US supply report gave mixed signs about demand for crude.

Benchmark oil for October delivery was up 4 cents to $85.48 at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude rose $1.02 to finish at $85.44 yesterday.

In London, Brent crude for October delivery was up 19 cents to $109.50 on the ICE Futures exchange.

The American Petroleum Institute said late yesterday that crude inventories fell 3.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of two million barrels.

However, inventories of gasoline jumped 6.4 million barrels last week while distillates rose two million barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later today.

Investors are closely watching economic and oil data for evidence about the strength of US crude demand. Prices have fallen from near $115 in May amid growing speculation that the US economy could contract soon.

"The market has gone through a shift with the emergence of talk of double dip recession," BNP Paribas said in a report.

The bank said it lowered its average crude price forecast to $92 for the third quarter and $98 in the fourth but still expects prices to rise from current levels because of expected US dollar weakness and low interest rates.