By Hil Anderson, UPI Chief Energy Correspondent

Crude prices came close to the record high price on the New York Mercantile Exchange Wednesday despite increases in both crude and gasoline supplies noted in two weekly inventory reports that are closely watched by oil traders.

The continuing uncomfortable price trends on NYMEX have been giving credence to the blunt statement made Saturday by Venezuelan President Hugo Chavez, who said in India that the world should "forget cheap oil."

Chavez' comments referred to the days of the Asian recession in 1999 when crude crumbled to around $10 per barrel; however, they also likely applied to the times just a year ago when crude was trading on NYMEX at under $40 per barrel.

By contrast, April crude settled at $54.77 per barrel Thursday after apparent profit-taking kicked in late in the day after trading topped out at $55.65, just short of last October's record settlement price of $55.67.

As has been the case in recent weeks, the mood on the exchange has been increasingly bullish even as the supply situation in the key U.S. market has been relatively secure and is showing no signs of any potential shortages of gasoline during the summer peak-demand season.

The U.S. Energy Information Administration said in its supply report Wednesday that gasoline stocks "inched" lower by a paltry 200,000 barrels but remained within the normal volume range for this time of year.

That fact alone should be good news for motorists who remember well the long summer of 2004 when pump prices were well above $2 per gallon. The fact that the EIA determined retail gaso line was averaging $1.999 per gallon on Wednesday indicated that perhaps supplies weren't quite so adequate.

EIA analysts noted Wednesday that a steady increase in demand appeared to be catching up with the United States' capacity to produce and to import gasoline.

"Recently, gasoline prices have been rising in response to late winter rising crude oil prices and high rates of refinery utilization," the federal agency noted. "Despite relatively high absolute levels for gasoline inventories, days' cover - the beginning inventories divided by demand per day - for gasoline has generally been declining on a year-over-year basis for over two years, suggesting increasing short-term tightness for gasoline markets."

Gasoline has also been trading at record levels and lost less than a penny Wednesday despite the reassuring conclusions about the supply picture heading into summer.

Gasoline demand is indeed expect ed to grow in the coming weeks and is projected by the EIA to push the pump price of gasoline to an average of $2.15 this spring and $2.10 for all of 2005.

Gasoline demand in the United States is expected to grow 1.8 percent during 2005 and 2006, which does not seem like much unless it is also considered that demand grew 1.4 percent last year, and U.S. refineries have been running at or above 90 percent of their capacity.

At the same time, the EIA expects total world energy demand to grow 2.5 percent over the 2005-06 period, a rate the agency said "exceeds expected growth in non-OPEC (crude) supply and global refinery capacity."

All eyes have been on growing oil demand in China and India as the new 600-pound gorillas in the energy market, and nothing short of another major economic meltdown in Asia or a significant strengthening of the slumping U.S. dollar will do much to cool off that demand.

The EIA th is week projected a steady uptick in Chinese demand for crude from 7.1 million bpd in the fourth quarter of last year to 7.6 million bpd at the end of the current year and peaking at more than 8 million in late 2006.

At the same time, U.S. demand will hover around 20 million bpd, and total world demand will bounce around and land somewhere between 81 million and 89 million bpd. Crude production worldwide will average 85 million to 87 million bpd during the same period.

So it is the longer-term supply-and-demand picture coupled with already hefty prices that have the bulls restless and seeing crude as a very attractive investment and thus are likely to keep bidding up the price in the coming weeks.

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