* U.S. stocks dropped, while refineries revved up activity: EIA
* WTI futures rebound as crude buildup is less than feared

By Alex Nussbaum

(Bloomberg) —

Oil prices rebounded on Wednesday as a government reportshowed shrinking supplies of U.S. gasoline, suggesting more demand ahead for crude suppliers.

Futures in New York rose as much as 0.5%, erasing an earlier loss, after the Energy Information Administration said domestic gasoline inventories fell 1.12 million barrels, far ahead of analyst forecasts. Refinery utilization rates ticked higher, suggesting crude processors may be ready to gear up consumption after an extended maintenance season.

That offset a 5.43 million barrel increase in crude supplies that was less than some of the most bearish estimates had suggested.

West Texas Intermediate crude for June delivery advanced 6 cents to $61.84 a barrel on the New York Mercantile Exchange at 10:53 a.m. local time. It had earlier fallen as low as $60.85 earlier in the session as signs of rising U.S. oil supplies offset concerns about tensions in the Middle East.

–With assistance from Amanda Jordan, James Thornhill and Sharon Cho.

To contact the reporter on this story:
Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Catherine Traywick, Joe Carroll