23 May 2007 - 14:52
  • News Code: 105432

Crude oil traded near a three-week high in New York on speculation U.S. refiners will increase processing to meet gasoline demand over the summer holidays.

An Energy Department report tomorrow may show unchanged inventories last week, stemming four weeks of gains, analysts said. In London, the price of Brent oil, the benchmark for two- thirds of global output, rose to the highest in more than eight months after attacks on Nigerian facilities disrupted supplies from Africa"s biggest oil producer.

 

``This weekend is Memorial Day in the U.S. and gasoline demand will rise to full throttle,"" said Kazuhiko Saito, a commodity strategist at Interes Capital Management in Tokyo. ``Even if oil falls, it may be limited to $65 with supply concerns because of armed gang attacks in Nigeria and gasoline demand in the U.S.""

 

Crude oil for June delivery was at $66.18 a barrel, down 9 cents, in after-hours electronic trading on the New York Mercantile Exchange at 3:09 p.m. in Singapore.

 

U.S. gasoline pump prices rose to $3.218 a gallon in the week ended yesterday, according to the Energy Department. That compares with $1.417 in March 1981, equal to an inflation- adjusted price of $3.20 today.

 

The June oil contract expires at the close of trading and jumped 44 cents a barrel more than its higher-priced July counterpart yesterday.

 

June oil rose $1.33, or 2.1 percent, to $66.27 yesterday, the highest close for the front-month future since April 27. The more-actively traded July contract was at $66.85, down 2 cents.

 

Brent Crude

 

Brent crude for July settlement was at $70.39 a barrel, down 10 cents, on the ICE Futures Exchange in London. The contract climbed $1.07, or 1.5 percent, to $70.49 a barrel yesterday, the highest close since Aug. 28.

 

The difference in price, or spread, between the Brent oil contract and the West Texas Intermediate contract, the benchmark crude in New York, has risen to $4.24 today from $4.22 yesterday.

 

Gasoline demand in the U.S., the world"s biggest oil consumer, usually peaks between June and August as motorists take to the roads for summer vacations starting with the Memorial Day holiday on May 28.

 

Stockpiles of the motor fuel probably gained 1.5 million barrels last week, based on the median estimate from a Bloomberg survey of five analysts. Inventories held 195.2 million barrels on May 11, or 7.5 percent less than the five-year average.

 

``Builds in gasoline should be a bullish support for crude oil as more is being used,"" said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California.

 

Gasoline Drops

 

Gasoline for June delivery was at $2.3980 a gallon, down 0.33 cent.

 

U.S. crude oil stockpiles, already 6.9 percent above the five-year average, were probably unchanged last week, according to the analyst survey. Inventories held 342.2 million barrels on May 11, 22 million barrels more than usual for the period, the Energy Department said last week.

 

Given the ``enormous"" size of those stockpiles, oil should probably be trading around $65, Altavest"s Hartmann said. Fresh buying may be unlikely unless it can break above $68.50.

 

``We have a huge supply in the U.S. but it"s still relatively tight in the rest of the world,"" Hartmann said. ``Maybe we"re playing a little bit of catch up with Brent and the rest of the world market.""

 

In Nigeria, the main militant group in the Niger Delta said it may attack a pipeline supplying the Port Harcourt refinery to protest the plant"s sale by the nation"s government.

 

`Destroy Pipelines"

 

``We will destroy the pipelines to and from that refinery to prevent it being operational until we have it under our control,"" Jomo Gbomo, a spokesman for the Movement for the Emancipation of the Niger Delta, said in an e-mail yesterday.

 

Oil and gas workers will stop work at Nigerian National Petroleum Corp. sites on May 24 to protest the sale of the government"s stake in the refinery to Bluestar Oil Services Ltd., a Nigerian group, for $561 million.

 

The Organization of Petroleum Exporting Countries, which supplies about two-fifths of the world"s oil, won"t increase output to meet summer driving demand, officials from Libya and Qatar said yesterday.

 

``We are convinced that the market is not short of supply,"" Qatari Energy Minister Abdullah Al-Attiyah told reporters in the Persian Gulf nation"s capital of Doha. Geopolitical risks in the Middle East and Africa, not lack of production, are pushing oil prices higher, he said.

 

OPEC pledged to reduce output by 1.7 million barrels a day last year. The group, excluding Iraq and Angola, which aren"t restricted by quotas, produced 26.41 million barrels a day in April, down 1.2 million barrels since September, according to Bloomberg estimates.

 

PIN/BLOOMBERG.COM

News Code 105432

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