By Brian Baskin

Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Crude futures rose slightly Wednesday, holding onto recent gains on expectations of a decline in U.S. fuel supplies.

Light, sweet crude for June delivery traded 12 cents, or 0.1%, higher at $83.97 a barrel on the New York Mercantile Exchange. The May contract expired at $83.45 a barrel on Tuesday. Brent crude on the ICE futures exchange traded 65 cents, or 0.8%, higher at $85.45 a barrel.

Although the June contract is virtually unchanged from its previous settlement, that still represents a more than 50-cent increase over the expiration price of the May contract on Tuesday.

The slight gains reflect a cautious optimism that U.S. fuel inventories will defy expectations by dropping in weekly data due out from the Energy Information Administration at 10:30 a.m. EDT. The American Petroleum Institute, an industry group, on Tuesday reported a 1.7-million-barrel decline in gasoline stockpiles and a 3.1-million-barrel drop in distillate inventories, including heating oil and diesel.

Concerns about abnormally high gasoline inventories have become an increasingly heavy weight on oil prices with the approach of summer, when U.S. demand for the fuel typically peaks. Refiners have rapidly ramped up crude processing in recent weeks, potentially creating a fuel glut if demand doesn't surge as expected.

"The latest API data could add a bullish spin to the product market," wrote analysts with JBC Energy.

Both fuel futures contracts were stronger than oil on Wednesday. Front-month May reformulated gasoline blendstock, or RBOB, recently traded 1.29 cents, or 0.6%, higher at $2.2938 a gallon. May heating oil traded 1.81 cents, or 0.8%, higher at $2.1983 a gallon.

However, analysts surveyed by Dow Jones gave an average forecast for gasoline stocks to rise 300,000 barrels and distillate inventories to grow by 900,000 barrels. Oil inventories are seen falling 200,000 barrels, while the API reported a 700,000-barrel decline.

The 3.1% increase in oil prices since Monday also reflects a relaxing of flight restrictions across Europe in reaction to a cloud of volcanic ash. The flight bans at many major airports cut jet fuel demand by as much as 1 million barrels a day between Thursday and Monday.

The demand lost over the five days with the widest disruption cuts no more than 15,000 barrels a day off of average global oil demand this year, wrote analysts with Barclays Capital. World demand should average 86.6 million barrels a day this year, according to the International Energy Agency.

"15,000 b/d of lost jet fuel demand should make little difference to global oil demand balances this year, if any at all, and should remain a short-term disruption," the analysts wrote.

-By Brian Baskin, Dow Jones Newswires; 212-416-2453; brian.baskin@dowjones.com.

Source: http://online.wsj.com/article/BT-CO-20100421-710048.html?mod=WSJ_World_MIDDLEHeadlinesEurope