Oil extends gains above $77 in Asia as US crude supplies drop more than expected last week

Oil rises above $77 after US crude supply drop

SINGAPORE — Oil prices extended gains above $77 a barrel Thursday in Asia as a larger than expected drop in U.S. crude supplies fueled investor optimism that consumer demand is improving.

Benchmark crude for February delivery was up 65 cents to $77.32 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange amid light volume Christmas Eve holiday trading.

The contract rose $2.27 to settle at $76.67 on Wednesday after the Energy Department’s Energy Information Administration said U.S. crude inventories fell 4.9 million barrels. Analysts had expected a drop of 2.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude has jumped from $69 a barrel last week on investor expectations that global crude demand, especially from Asia, will rebound next year and help boost prices. Oil prices have more than doubled from a year ago, and most analysts are forecasting crude will average between $75 and $85 in 2010.

In other Nymex trading in January contracts, heating oil rose 0.82 cent to $2.02 while gasoline gained 1.03 cents to $1.98. Natural gas jumped 6.8 cents to $5.89 per 1,000 cubic feet.

In London, Brent crude for February delivery rose 57 cents to $76.02 on the ICE Futures exchange.