Oil is treading water -- for now -- at a near-record $122 per barrel Wednesday, after a U.S. Energy Information Administration report indicated that weekly crude oil inventories rose a larger than expected 5.7 million barrels.

Economists surveyed by Bloomberg News had expected crude oil inventories to increase by 1.63 million barrels last week. Also, gasoline supplies rose by 800,000 barrels.

Oil idles near $122

The larger than expected increase in oil inventories put a brake on oil prices, for the moment. Oil rose just 30 cents to $122.14 per barrel in Wednesday morning trading. The other major energy commodities were also virtually unchanged. Unleaded gasoline gained 1 cent to $3.11 per gallon. Heating oil rose about 2 cents to $3.37 per gallon. Natural gas gain 2 cents to $11.15 per million BTUs.

Meanwhile, refineries operated at 85.0% of capacity for the week ended May 2, 2008, the EIA report indicated, down from 85.4% a week ago.

Concern about refinery utilization, capacity

Independent energy trader Jim Dietz said the decline in refinery utilization is troubling. "We need all of the gasoline refining capacity we can get. It should have increased by now above 86% or 87%. Traders will see that low refinery utilization number and most likely bid-up gasoline, which will push oil higher still," Dietz said. Dietz added that he is long with oil and gasoline, with both daily and monthly trades.

Dietz added that the oil market is so tilted toward the buy side that traders are "picking and choosing" the most bullish aspect of any oil or oil product report, and using that as a basis to justify a long position. "Today was a classic example. Wednesday's report contained a large increase in oil inventories. In a normal market, oil would sell-off after that large of a build," Dietz said. "But we're not in a normal market. Almost everyone is confident that international demand will be solid, and offset any consumption declines during a U.S. recession."

Dietz added that he expects oil to test $130 later this month, with the average U.S. gasoline price rising to $3.80-$3.85 by June 1.