Oil Boom Profits

Oil prices surged to almost 74 dollars as traders built long position before the U.S. Independence Day holiday amid concerns over gasoline supply.

Light sweet crude for August delivery rose 41 cents to close at 73.93 dollars a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for August delivery rose 64 cents to 73.51 dollars per barrel.

The New York Mercantile Exchange will remain closed Monday and Tuesday for the Independence Day holiday, when thousands of Americans will drive for vocation and the demand over gasoline may peak.

U.S. reserves of gasoline fell by 1 million barrels to 212.4 million over the week ended June 23, the Department of Energy said Wednesday in its weekly market update.

Oil Rises an 8th Day as Gasoline Supplies Fall Amid Peak Demand

June 30 -- Crude oil rose for an eighth day in New York, the longest rally in more than a year, on concern peak gasoline demand during the Fourth of July weekend will strain fuel supplies that are below year-earlier levels.

A record 34.3 million Americans will travel during the Independence Day holiday weekend starting today, according to the AAA, the largest U.S. motor club. Gasoline stockpiles fell in the U.S. last week, ending a nine-week rise, even as the fuel became more expensive at the pump.

``Even though the gasoline price is high, the demand is not getting any less,'' said Tetsu Emori, a commodity strategist with Mitsui Bussan Futures Ltd. in Tokyo. ``That's an important sign that U.S. consumers will pay any price.''

Crude oil for August delivery rose as much as 33 cents, or 0.5 percent, to $73.85 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $73.65 a barrel at 11:05 a.m. London time. Prices are up 30 percent from a year ago.

The contract climbed 1.8 percent yesterday to $73.52 a barrel, the highest close since May 2. Oil reached a record $75.35 on April 21 and April 24. Prices last gained eight days in a row in September 2004.

The Nymex will close its energy markets early today, at 1 p.m. New York time. The markets will remain shut for an extended holiday weekend, resuming electronic trading at 6 p.m. local time on July 4.

Eighteen of 34 analysts and traders, or 53 percent, surveyed by Bloomberg News said prices will rise next week.

$75 Expected

``Next week I expect to hit $75. This weekend really kicks off the summer holidays,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. ``The Fed is going to be wary of raising interest rates any further,'' and that should help sustain growth, he said.

Brent crude oil for August settlement climbed as much as 47 cents, or 0.6 percent, to $73.35 a barrel on the London-based ICE Futures exchange. Brent touched $74.97 a barrel May 2, the highest since trading began in 1988.

The U.S. Federal Reserve yesterday raised interest rates by a less-than-expected quarter-point to 5.25 percent, raising expectations the Fed may limit future increases.

Hedge funds, which borrow against the value of their assets, may begin buying back into the crude oil market as the cost of financing shouldn't increase.

``Lower interest rates will spur the market players to reserve money from banks at a lower cost,'' said Naohiro Niimura, vice president for derivative products at Mizuho Corporate Bank Ltd. in Tokyo. ``They think they'll get a better return in the commodity markets than they get on the interest rates.''

Gasoline Surprise

U.S. gasoline stockpiles unexpectedly fell 1.1 million barrels last week, the first decline in nine weeks, leaving supplies at 212.4 million barrels, or 1.7 percent less than a year earlier, the Energy Department said on June 28.

More than half of the analysts and traders in the Bloomberg survey said a decline in gasoline inventories may lead to an increase in prices next week. Seven projected a decline and nine said futures will be little changed.

The July gasoline contract, which expires today, was down 1.48 cents at $2.28 a gallon in Nymex electronic trading, after settling yesterday at its highest close since Sept. 28. The more actively traded August contract was at $2.2247 a gallon, down 0.69 cent.

Oil prices rose by more than $1 a barrel on Thursday, climbing on the back of a rally in gasoline futures, which settled at a nine-month high.

The approach of the Independence Day holiday, traditionally a busy period for U.S. drivers, was a major factor behind the market's psychology, brokers said.

"Demand is up," said Phil Flynn of Alaron Trading Corp. "And it's going to be a four-day holiday this year" because July 4 falls on a Tuesday.

Flynn said energy markets also responded to the Federal Reserve's apparent softening of its stance on future interest rate hikes, a signal that sent stock prices surging as well. "The Fed decision is bullish for all the commodities," Flynn said.

Light sweet crude for August delivery rose $1.33 to settle at $73.52 a barrel on the New York Mercantile Exchange, where gasoline futures surged 8.89 cents to $2.2948 a gallon. It was the highest settlement price for front-month gasoline futures since Sept. 29, when the closing price was $2.37 shortly after Hurricane Rita put several Gulf Coast refineries out of commission.

Brent crude futures on the ICE Futures exchange in London climbed $1.47 to finish at $72.88 a barrel.

Gasoline futures have risen by more than 15 percent over the past eight trading sessions. Traders said one spark for the buying was the closure of the Calcasieu Ship Channel on the Gulf Coast, where a cleanup is under way following an oil spill at a Citgo Petroleum Corp. refinery in Lake Charles, La. The channel was partially reopened Wednesday, though normal traffic has yet to resume.

Brokers said the market is also reacting to the fact that gasoline demand in the U.S. continues to rise in spite of soaring pump prices. Over the past four weeks, daily gasoline demand was up 0.9 percent from a year ago at 9.4 million barrels a day, according to government statistics. The average retail price of regular gasoline nationwide is $2.87 a gallon.

And on Wednesday, the U.S. Energy Department reported that gasoline supplies shrank last week for the first time in more than two months.

Oil prices are 23 percent higher than a year ago, driven higher by strong demand and a limited supply cushion conditions that are worrisome to traders given the backdrop of considerable geopolitical uncertainty, such as violence in Nigeria, the war in Iraq and Iran's diplomatic showdown with the West over its nuclear program.

Washington has warned Iran that it could face political and economic sanctions before the U.N. Security Council if it doesn't stop its nuclear activities, which the United States and its European allies say is an attempt to produce nuclear weapons. Tehran says the uranium will be used only for a peaceful energy program.

Iran is OPEC's No. 2 producer of oil, and traders are worried about the outlook for those supplies. In its weekly petroleum report, the U.S. Energy Department said Wednesday that commercial inventories of crude oil declined last week by 3.4 million barrels to 343.7 million barrels, or 4 percent above year ago levels. Supplies of gasoline shrank by 1 million barrels to 212.4 million barrels, or 2 percent below year ago levels.

"The fact that there is an inventory drop is in itself no big deal because it's the kind of thing you would expect at this time of the year," said John Vautrain, energy analyst for Purvin & Gertz in Singapore. He added that high fuel prices will not keep Americans from traveling in the summer.

In other Nymex trading, heating oil futures rose by more than 5 cents to settle at $1.9876 per gallon, while natural gas futures slid 2.5 cents to $6.135 per 1,000 cubic feet.

Oil prices extended their gains Thursday after the U.S. government reported that supplies of oil and gasoline shrank last week - just as the summer driving season gets into full swing.

Concerns over declining gasoline stocks in the U.S. have been closely watched by traders who are anticipating strong demand over the Independence Day weekend, when American travelers hit the road.

Light, sweet crude for August delivery rose 35 cents to $72.54 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. Brent crude futures on the ICE Futures exchange in London climbed 53 cents to $71.94 a barrel.

Gasoline futures rose more than 2 cents to $2.2320 a gallon. Heating oil futures rose nearly 3 cents to $1.9650 a gallon, while natural gas futures were up 3 cents to $6.191 per 1,000 cubic feet.

Gasoline prices have risen by almost 20 cents over the past week following the closure of the Calcasieu Ship Channel on the Gulf Coast, where a cleanup is under way following an oil spill at a Citgo Petroleum Corp. refinery in Lake Charles, La.

But the U.S. Coast Guard said Wednesday that the channel was partially reopened, raising hopes that normal traffic could resume as early as this weekend.

In its weekly petroleum report, the U.S. Energy Department said commercial inventories of crude oil declined last week by 3.4 million barrels to 343.7 million barrels, or 4 percent above year ago levels. Supplies of gasoline shrank by 1 million barrels to 212.4 million barrels, or 2 percent below year ago levels.

Over the past four weeks, daily gasoline demand was up 0.9 percent at 9.4 million barrels a day.

"The fact that there is an inventory drop is in itself no big deal because it's the kind of thing you would expect at this time of the year," said John Vautrain, energy analyst for Purvin & Gertz in Singapore. He added that high fuel prices will not keep Americans from traveling in the summer.

Traders' concerns about gasoline supplies were mitigated somewhat by word from the Energy Department that it had approved loans of oil from the nation's Strategic Petroleum Reserve to Citgo Petroleum Corp. and ConocoPhillips Co. The agency loaned a combined 750,000 barrels.

Oil prices remain about 24 percent higher than a year ago, propped up by strong global demand and geopolitical worries such as violence in Nigeria, the war in Iraq and Iran's diplomatic showdown with the West over its nuclear program.

Washington has warned Iran that it could face political and economic sanctions before the U.N. Security Council if it doesn't stop its nuclear activities, which the United States and its European allies say is an attempt to produce nuclear weapons. Tehran says the uranium will be used only for a peaceful energy program.

Iran is OPEC's No. 2 producer of oil, and traders are worried about the outlook for those supplies.

Iran's top nuclear negotiator, Ali Larijani, and the European Union's foreign policy chief, Javier Solana, plan to meet on July 5 to discuss a package of incentives from key global powers to try to persuade Iran to roll back its uranium enrichment program.

Crude oil seeping from a gnarled steel wellhead forms a lake the size of a soccer field near the Nigerian village of Kegbara-Dere, but these oil fields have not exported a drop in 13 years.

The Ogoni tribe kicked Royal Dutch Shell out of this part of the Niger Delta in 1993 protesting that they had received nothing in return for four decades of oil production. Today, the same grievances are fueling a revolt across the entire oil heartland of Africa's largest producer.

"If Shell never comes back, we would have lost nothing," says Young Kigbara, a member of the Movement for the Survival of the Ogoni People, surveying the pungent pool of oil and an abandoned pumping station nearby. "We are better off without oil production."

Oil is the mainstay of the Nigerian economy, but has done little for the rural communities of Nigeria's far south where it is extracted.

Cut off from the national road and power networks, and deprived of basic schools and health care, delta inhabitants have responded by denying companies access to progressively larger tracts of land, also denying them access to billions of barrels of oil.

This costs Nigeria about 700,000 barrels of oil daily, equivalent to the total consumption of Turkey and worth $17 billion a year, officials estimate.

And the situation is deteriorating rapidly.

Protests that began with peaceful Ogoni rallies have evolved into military-style raids, car bombings and kidnappings that forced Shell to shut down oil fields responsible for a quarter of the country's output in February.

RESOURCE CONTROL

As their methods have become deadlier, the militants' demands have become greater. They no longer just complain about neglect; they demand control of their resources.

"Resource control is not just about cash. It is participation in the decision-making process," says Kigbara.

The latest group to emerge at the vanguard of this struggle is the Movement for the Emancipation of the Niger Delta, or MEND, which has staged a series of deadly attacks on the industry since the end of last year.

It says it aims to bring all of Nigeria's output of 2.4 million barrels a day to a halt unless its demands are met.

"Each step in the history of the Niger Delta struggle has always assumed more sophistication than the previous one," said Oronto Douglas, a human rights lawyer nominated by MEND to mediate with the federal government.

"A total shutdown is a high possibility," he said, adding that triggers could include military reprisals against the militants or fraud in next April's general elections.

Underpaid and ill-equipped, the Nigerian troops deployed to protect oil installations since 2003 cannot match the speed and agility of the militants.

MEND's highly coordinated attacks, using hundreds of fighters on speedboats armed with assault rifles, dynamite and rocket-propelled grenades, send troops running for cover.

OIL THIEVES

Militias have existed for centuries in this maze of mangrove-lined creeks, and gained notoriety during colonial times for attacking European ships carrying slaves and palm oil.

Today, armed groups in league with international syndicates take advantage of the region's inaccessibility to siphon huge volumes of crude oil from pipelines, often with the connivance of military, government and oil company officials.

The government routinely dismisses militant leaders as oil thieves, although it has begun to make concessions to the region in response to the latest wave of violence.

"Everyone accepts there is a criminal element to the struggle, but criminality was not the origin of the struggle. People have always agitated for fairness," said Chris Alagoa, coordinator of the Niger Delta Peace and Security Secretariat, a combined civil society and government initiative.

MEND has so far rejected the government's overtures, sticking to its demands of resource control, $1.5 billion oil spill compensation for delta villages, and the release of two jailed leaders from the region.

While Shell executives are optimistic that they will be able to return to their oil fields soon, they first want a deal with the people who drove them away.

The Ogoni dispute, unresolved after 13 years, serves as an ominous precedent.

"The Ogonis succeeded in grounding Shell activity for close to 15 years. Now MEND has started. Little by little they will close down all the oil production in the Niger Delta," said Sampson Agba, a community worker in Iko village.

World oil prices advanced Wednesday before the latest market update on energy stockpiles in the United States, with all eyes on motor fuel reserves amid the peak-demand driving season, dealers said.

New York’s main contract, light sweet crude for delivery in August, added 27 cents to 72.19 dollars per barrel in electronic deals before the official opening of the US market.

In London, Brent North Sea crude for August delivery gained 31 cents to 71.29 dollars per barrel in electronic trading.

“Crude futures were up (on Wednesday) ahead of inventory data expected to show continued strong demand for gasoline as consumers stay undeterred by increased fuel prices during the peak demand summer driving season,” Sucden analyst Sam Tilley said.

The US Department of Energy (DoE) was to release its traditional weekly snapshot of energy stocks later Wednesday for the week to June 23. Analysts’ consensus forecasts are for a rise in gasoline or petrol stocks of around 450,000 barrels.

The price of crude oil has climbed past 72 dollars in New York as traders anticipate tight gasoline or petrol stocks during the current US summer driving season with many Americans taking to their cars for holidays.

Despite higher gasoline prices, US drivers seem unwilling to curb consumption. Over the past four weeks, US demand for gasoline has been running 0.9 percent higher than a year ago, the DoE had reported last week.

“The market (is) focusing on gasoline inventory in the US which is important for the summer season,” said Tetsu Emori, chief commodity strategist at Mitsui Bussan Futures. “Gasoline supply (is) be very limited even if the US is importing but consumption is not getting less.” Market expectations are for crude oil inventories to fall by 1.4 million barrels.

Crude futures have risen so far this week, supported by refinery disruption and strong energy demand in the United States and China, as well as jitters over the Iranian nuclear energy crisis.

Crude-oil prices rallied Wednesday after government data showed shrinking inventories of oil and gasoline last week amid rising demand and falling imports.

Energy futures have been propped up in recent months by strong global demand and geopolitical worries such as violence in Nigeria, the war in Iraq and Iran's diplomatic showdown with the West over its nuclear program.

Light sweet crude for August delivery rose 68 cents to $72.20 a barrel on the New York Mercantile Exchange.

In its weekly petroleum report, the Energy Department said commercial inventories of crude oil declined last week by 3.4 million barrels to 343.7 million barrels, or 4 percent above year ago levels. Supplies of gasoline shrank by 1 million barrels to 212.4 million barrels, or 2 percent below year ago levels.

Over the past four weeks, daily gasoline demand was up 0.9 percent at 9.4 million barrels a day.

Citigroup oil analyst Tim Evans said he was surprised to see gasoline imports decline for the second week in a row and that the situation "bears watching."

However, with refineries boosting the amount of oil they produce, Evans said the market is well supplied.

Brent crude futures on the ICE Futures exchange in London climbed 55 cents to $71.53 a barrel.

Gasoline futures were flat Wednesday at $2.20 a gallon, but they had risen by roughly 20 cents a gallon over the past week in part because of the closure of a key shipping channel along the U.S. Gulf Coast that minimally disrupted crude-oil supplies to nearby oil refineries.

The channel has been off limits due to the spread of oil from a spill last week at a Citgo Petroleum Corp. refinery in Lake Charles, La. It could remain mostly closed through the end of the week, depending on how the cleanup proceeds, a Coast Guard spokesman said.

Citgo said late Tuesday that it requested - and was approved for - a loan of 250,000 barrels of crude oil from the U.S. Strategic Petroleum reserve "to help maintain production rates" at its 425,000 barrel-per-day Lake Charles facility while the channel remains closed.

The shipping snags came days ahead of the July 4 holiday in the U.S., when gasoline demand typically peaks as American travelers hit the road. The U.S. Coast Guard said Wednesday the Calcasieu Ship Channel was partially reopened, and that limited tug and barge traffic continues to move through an intercoastal waterway.

Merrill Lynch said in a research note that it expects "severe supply bottlenecks" to persist for another two years, though it said with crude oil inventories rising around the globe OPEC may need to cut production next year.

On Tuesday, Iran's Ayatollah Ali Khamenei said the country does not need negotiations with the United States over its nuclear program, apparently seeking to reassure hard-liners the country will not cave in as it considers a key Western incentives package.

Iran is OPEC's No. 2 producer of oil, and traders are worried about the outlook for those supplies.

Washington has warned Iran that it could face political and economic sanctions before the U.N. Security Council if it doesn't stop its nuclear activities, which the United States and its European allies say is an attempt to produce nuclear weapons. Tehran says the uranium will be used only for a peaceful energy program.

In other trading Wednesday, heating oil futures were flat at $1.96 a gallon, while natural gas futures were steady at $6.11 per 1,000 cubic feet.

Reliance Industries discovers oil off India's eastern coast

NEW DELHI India's Reliance Industries Ltd. has struck oil off the country's eastern coast, a discovery that could lead to finding more reserves in the region, the company's chairman said Tuesday.

"We have found new oil in India,'' Reliance Chairman Mukesh Ambani said at the annual shareholders' meeting.

The discovery was made in the Krishna-Godavari basin along the eastern coast, where the company is drilling several areas for oil, he said. "Testing has been done in two zones located 3 kilometers (2 miles) below the sea.''

Ambani said the company has yet to assess the potential reserves of the newly discovered oil block.

"More than the size, this discovery signifies a large geological play that could result in future discoveries,'' he said.

Oil exploring companies, including Reliance Industries, state-owned Oil & Natural Gas Corp. and U.K-based Cairns Energy, have made several oil and gas discoveries off India's eastern coast in recent years. But none have started commercial production.

Most Americans unaware Canada is their biggest oil supplier, poll


June 28, 2006

WASHINGTON - A new poll suggests that only a tiny minority of Americans -- four per cent -- know that Canada is the largest supplier of crude oil to the United States.

But the survey also suggests that 88 per cent of Americans have a favourable view of Canada and that 41 per cent would be willing to pay even higher gasoline prices to replace oil from unstable regions.

The poll was released by the Canadian American Business Council to coincide with Alberta's promotional events this week in the U.S. capital. The province is also featured in the Smithsonian Folklife Festival starting Friday.

Murray Smith, Alberta's representative in Washington, says the province has just scratched the surface in educating Americans about energy and has started at the highest levels first. One in three Alberta jobs depends on exports to the United States and 85 per cent of those exports are petroleum and natural gas.

The poll surveyed 1,000 people from June 13 to 15. It has a margin of error of 3.1 per cent.

Oil Trades Above $72 on Gasoline Concern, Shipping Disruption

June 28 -- Crude oil traded above $72 a barrel in New York on concern rising demand and a shipping disruption may hamper efforts to increase U.S. summer fuel stockpiles.

An Energy Department report today will probably show gasoline inventories rose by 450,000 barrels last week, the smallest increase forecast by analysts in eight weeks. Gasoline futures reached a seven-week high after ConocoPhillips asked yesterday to tap the U.S. strategic reserve following an oil spill cut supplies from a Louisiana shipping channel.

``Gasoline demand doesn't seem to be affected by these high prices,'' said Chris Mennis, owner of oil broker New Wave Energy in Aptos, California. ``And now we've got four refineries affected by a spill.''

Crude oil for August delivery was at $72.12 a barrel, up 20 cents, in after-hours electronic trading on the New York Mercantile Exchange at 9:09 a.m. in Sydney. Prices today are 24 percent higher than a year ago.

Yesterday, the August contract reached $72.50, the highest intra-day price in almost three weeks. It ended the session up 12 cents at $71.92 a barrel, the highest close since June 6.

ConocoPhillips, the second-largest U.S. oil refiner, asked for 500,000 barrels of oil from the nation's strategic petroleum reserve to supply its Westlake refinery in Louisiana.

The plant, along the Calcasieu Parish Ship Channel, has been operating at reduced rates since shortly after part of the channel was closed a week ago because of an oil spill, spokeswoman Lara Campbell said yesterday.

Shipping Delays

About 20 miles of the 60-mile channel, which connects the Lake Charles, Louisiana, port to the Gulf of Mexico, may be shut for as long as another four days, the U.S. Coast Guard said yesterday. About 40 ships were delayed as of June 26.

``It's another example of the vulnerability of the U.S. refinery structure,'' New West's Mennis said. ``It's not a hurricane but it is a supply interruption.''

Gasoline for July delivery was at $2.2010 a gallon in after-hours trading, after rising 1.97 cents, or 0.9 percent, to $2.1985 yesterday, the highest closing price since May 11.

The Energy Department is scheduled to release its report on last week's U.S. inventory levels at 10:30 a.m. in Washington.

Gasoline supplies probably rose for a ninth week, increasing 450,000 barrels, according to the median of 14 estimates in a Bloomberg News survey of analysts. Inventories rose 294,000 barrels in last week's report, the smallest increase in eight weeks, leaving supplies at 213.4 million barrels, 1.2 percent less than a year earlier.

Oil Near Three-Week High on Signs U.S. Gasoline Demand Rising

June 27 -- Crude oil traded near a three-week high in New York on speculation rising gasoline demand may soon start draining U.S. fuel stockpiles.

U.S. gasoline inventories last week probably rose by 400,000 barrels, the smallest gain forecast in the past two months, an Energy Department report may show tomorrow, based on a Bloomberg News survey of nine analysts. Gasoline supplies in the world's biggest oil consumer were 213.4 million barrels, 1.2 percent less than a year ago, the department said last week.

``Unleaded gasoline is definitely giving strong support to the crude oil market,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``It's the summer driving season and you've got the fourth of July coming up and people are going to be driving'' during the Independence Day holiday weekend, he said.

Crude oil for August delivery was at $71.83, up 3 cents, in after-hours electronic trading on the New York Mercantile Exchange at 9:09 a.m. in Sydney. Prices today are 19 percent higher than a year ago.

The August contract rose 93 cents, or 1.3 percent, to $71.80 a barrel yesterday, the highest close since June 6. Oil reached $75.35 on April 21, the highest since New York trading began in 1983.

``The realization that gasoline supplies have probably topped out is sending prices higher,'' Phil Flynn, vice president of risk management at Alaron Trading Corp. in Chicago, said yesterday. ``Demand has been pretty solid and may pick up.''

Gasoline Rally

Gasoline for July delivery was at $2.1760 a gallon in after-hours trading, after rising 2.4 percent to $2.1788 yesterday, the highest close since June 6. Prices rose 9.4 percent in straight gains the five previous sessions.

Gasoline jumped 3 percent on June 21, when the Energy Department's report showed stockpiles of the fuel rose 294,000 barrels in the week ended June 16, a fifth of the gain forecast.

Consumption in the four-week period averaged 9.41 million barrels a day, 0.9 percent higher than a year earlier, the department said last week.

Gasoline closing above $2.20 a gallon would be a ``very bullish sign'' for the energy markets, Altavest's Sander said. ``Iran is still just sitting in the background'' also supporting oil prices, he said.

Oil has risen 18 percent this year, in-part on concern that Iran, the world's fourth-largest oil producer, may cut exports in its dispute with the United Nations over its nuclear program.

`Ultimate' Weapon

Iran will disrupt oil supplies only as the ``ultimate'' weapon in the conflict over its nuclear program, government spokesman Gholam Hossein Elham said yesterday.

The U.S. and European Union are trying to convince Iran to drop its nuclear fuel ambitions by offering technology and trade incentives in exchange for the nation ceasing its uranium enrichment work.

Conditions are ``favorable for solving the nuclear issue diplomatically,'' the state-run Islamic Republic News Agency cited Elham as telling reporters at a news conference in Tehran yesterday. Disrupting oil supplies is the ``ultimate'' option and ``we don't see the necessity to plan such matters in the current atmosphere and with the given conditions.''

The likely long-term price of a barrel of oil, now trading at a near-record $70 a barrel, is on the increase as world demand proves more resilient than expected to rising crude costs.

The growing prospect of oil staying high also reflects the industry's challenge in accessing new reserves. Violence in major exporter Nigeria restrains supply and top world exporter Saudi Arabia is off-limits to foreign investors.

Oil should stay around $50 in the long run according to analysts and some OPEC producers, and $10 below that according to BP Plc Chief Executive John Browne. Three years ago, many analysts and companies assumed long-term prices nearer $20.

"Our view is oil should be a medium-term mid-point of $50," said Deborah White, analyst at Societe Generale in Paris.

"Producers and consumers can both live with it very happily. What I don't know is if in the longer term it's sustainable or if it will stimulate too much supply."

As U.S. crude extends its 4 1/2 year rally, some see its long-term price even higher than $50.

"The market's trying to feel out where the new long-run price should be," said Paul Horsnell of Barclays Capital. "It hasn't really been set in concrete yet."

"We'd open bidding at $60 and then go up rather than think of lower numbers."

RHETORIC, NOT FACT

Oil demand and economic growth have defied the gloomiest predictions to remain robust despite rising oil prices.

World oil consumption will rise by 1.5 percent this year, faster than in 2005, because of a "booming" world economy, the International Energy Agency says.

"What we have yet to find out is what is a price that consuming countries can't afford," SG's White said. "We once thought that they could not afford $40 or $50 or $60, but I think we understand that was rhetoric rather than fact."

U.S. crude hit a record $75.35 in April. Importers in 2004 were complaining that oil cost about as much and many believed $50 would see world growth grind to a halt.

Some members of OPEC, supplier of more than a third of the world's oil, now say an ideal price starts around that level.

"I say $50 to $55, this is the best oil price," said Abdullah al-Attiyah, oil minister for Qatar, on June 13.

The group in 2005 ditched a goal to keep its oil benchmark between $22 and $28 as rising demand eroded members' power to influence prices.

But for the IEA, an adviser to industrialized countries, OPEC's latest price aspirations are too steep. The agency's head Claude Mandil said in November oil "even at $50" was too high.

'COLLAPSE?'

Oil companies, skeptical about whether the rally will last, say prices should be lower still.

BP Chief Executive John Browne regards $60 oil as "unsustainably high" and has said $40 may prove to be a floor price for the commodity.

Executives point to brimming crude stocks in the United States, which are at the highest in eight years, and rising interest rates, potentially slowing economic growth.

"There's lots of talk of a price collapse," said a U.S. oil executive who declined to be identified. "Based on where inventories are, it should be $35."

While executives still remember a price crash to $10 in 1998 that hurt the industry, companies' perception of a floor for prices is on the increase.

Statoil ASA this month raised its long-term price assumption to $30-35 from $25-30.

"There is little to suggest we are returning to a price level like we saw at the end of the 1990s," Statoil's Chief Executive Helge Lund said.

Oil and gas companies are still scrambling to repair billions of dollars worth of hurricane-related damage to Gulf of Mexico energy infrastructure, even as this year's hurricane season gets under way.

Last season's triple hit – from hurricanes Katrina, Rita and Wilma – cost the industry an estimated $31bn in damage, some of which will never be fixed. Chevron, for example, recently sank its Typhoon platform instead of investing in costly repairs.

The result is that 15 per cent of daily oil production in the Gulf remains offline, as does 11 per cent of daily gas production. It could take years to restore all the production companies plan to bring back online. Indeed, companies are still fixing damage from Hurricane Ivan two years ago.

Mickey Driver of Chevron said: "You can see why gas is $3 a gallon. It is taking billions of dollars for the oil and gas industry to repair damage."

The costs of maintaining and servicing the industry had already been rising before the storms as companies increased exploration and production to capitalise on record oil and gas prices. Now the hurricanes have pushed them higher by increasing the demand for the contractors and supplies needed for repairs.

"You just have to get in line,'' said Evan Smith, co-manager of the Global Resources Fund at asset manager US Global Investors. "There are not enough trained and experienced people. There is a lack of equipment for repair and industry growth.''

The reconstruction of New Orleans and criticism of the Federal Emergency Management Agency for its role after Katrina have dominated the post-disaster commentary but the problems of getting the oil industry back on track are less well-documented.

The shortages of skilled workers and equipment have forced companies to prioritise so that, even as they have finished some key repairs, many are still fixing crucial energy infrastructure.

Shell has spent the past nine months restoring its Mars platform, the Gulf's largest production facility. That meant procuring one of only two lift barges in the world capable of lifting a 1,000-ton piece of equipment that had toppled on to the platform as well as a floating hotel to house 500 people to do the work.

Shell brought the platform back online at the end of May and it is only now turning its attention to the older and smaller Cognac platform.

Chevron's Empire terminal, which brings in, stores and distributes 20 per cent of Gulf production, is in the middle of an extensive repair effort that started immediately after the hurricanes but will not end until November.

Iran on Sunday repeated threats that it was ready to use its massive oil exports as a weapon to defend itself if it felt in danger in an international dispute over its atomic program.

But Oil Minister Kazem Vaziri-Hamaneh said international sanctions on 2.5 million barrels per day of Iranian crude exports would be impractical and would send oil prices over $100 a barrel, up from around $70 now.

Iran has been hauled before the U.N. Security Council over suspicions it is seeking nuclear missiles, a charge it denies. It could face economic sanctions and the United States has consistently declined to rule out military action.

Vaziri-Hamaneh said earlier this month the world's fourth biggest crude producer would prefer not to play the oil card and would only do so to defend its rights.

He struck a similar tone on Sunday, telling state television: "I think using the oil weapon would be advantageous to Iran in times of threats."

"But using such a weapon in the normal situation in the country and oil markets would mean confronting the world and we do not have such a policy," he added.

Eighty percent of Iran's export earnings come from oil.

However, U.S. Energy Secretary Sam Bodman has said the United States would be in "good shape" even if Iran did close the spigots, owing to healthy stockpiles.

The Chinese Government has been in talks with Saudi Arabia about producing oil and gas in the Desert Kingdom.

The news, which emerged last week, is the latest evidence of an expansionary Chinese energy policy driven by Beijing's concerns over assuring future supplies of energy, and the ambitions of the country's three main oil and gas companies to become global players.

Chinese economic growth has been sustained by oil, and is partly responsible for historical highs in the price over the past two years. This has presented a problem for its government. While domestic production of oil and gas has increased marginally, demand has risen dramatically and will continue to go up. According to energy advisers, Wood Mackenzie, Chinese oil production will actually fall in the next decade, from 3.6 million barrels a day in 2005 to 3.1 million in 2015.

This has already led to the country's three oil and gas companies - CNPC and its main subsidiary PetroChina; the Chinese National Offshore Oil Corporation (CNOOC); and Sinopec - to look overseas.

The three companies have spent some $9bn between them on acquisitions abroad since 2001, and there has been more spending on investment in overseas assets. These acquisitions have focused on Central Asia, Africa, Latin America and South East Asia.

CNPC spent $4bn buying PetroKazakhstan earlier this year. It has also invested in Sudan and Ecuador. Meanwhile, Sinopec, which has the lead position in petrol marketing in China but which also produces oil, has invested in deep-sea blocks off Angola. CNOOC has also invested there, as well as in Nigeria, where it has recently spent $2bn on deep-water developments.

Norman Valentine, analyst at Wood Mackenzie, says: 'The output from many of these overseas assets will be traded on the international market, but owning them gives the Chinese greater control over them.'

Last autumn CNOOC made a preliminary approach to buy US-owned producer Unocal, which has many south-east Asian assets. The approach foundered, thanks largely to concerns in Congress about the lack of US opportunity to buy Chinese firms, and fears over Chinese energy expansionism.

U.S. oil futures were steady on Friday with little fresh news to drive trading, following gains in the two prior sessions. Prices remained above $70 a barrel, buoyed by strong global demand, a Gulf Coast shipping snag and concerns about the unresolved tension between the West and Iran.

Light sweet crude for August delivery rose 3 cents to settle at $70.87 a barrel on the New York Mercantile Exchange, where gasoline futures were up by less than a penny to close at $2.1276 per gallon.

Brent crude for August fell $1.87 to $68.08 a barrel on London's ICE Futures exchange.

Oil prices rose Thursday - and again on Friday - as refineries along the Gulf Coast encountered some minor obstacles in the aftermath of an oil spill that disrupted ship traffic in a Louisiana waterway. Oil prices had climbed Wednesday after government data showed a smaller-than-expected build in domestic gasoline inventories.

World oil demand is expected to average close to 85 million barrels per day, though consumption is not growing as robustly as a year ago because of the slowing world economy.

In recent weeks, concerns about inflation and rising interest rates around the globe have contributed to a sell-off in metals and other commodities. Some analysts believe this could put downward pressure on energy prices, while others contend that the tight balance between supply and demand will keep a high floor underneath oil and refined products.

Supply disruptions in Iraq, Nigeria and the Gulf of Mexico have helped to support prices for the past year, as has the more recent diplomatic standoff between the West and Iran over Tehran's nuclear goals.

Iran's deputy nuclear negotiator, Javad Vaeidi, has rejected freezing uranium enrichment as a precondition for talks, but held out the possibility that negotiations on its nuclear program could result in such a moratorium - a stance Tehran has repeated in the previous weeks.

In other Nymex trading, heating oil futures fell by less than a penny to $1.9626 a gallon, while natural gas futures fell 21.3 cents to $6.226 per 1,000 cubic feet.

Shares of independent oil and gas companies trading on the Nasdaq soared in midday trading Friday after Anadarko Petroleum Corp. and Energy Partners Ltd. announced acquisitions that an analyst said "raises the bar" for other companies in the industry.

On Friday, oil and natural gas producer Anadarko Petroleum Corp. said it would pay $16 billion in cash, or $70.50 per share, for Oklahoma City-based Kerr-McGee Corp.

Anadarko also plans to buy Western Gas Resources, an independent natural gas explorer, for $61 a share, or $4.74 billion, and will assume $560 million in debt.

"Given the pullback in valuations we would expect consolidation on the service side to pick up," Morgan Keegan analyst Subash Chandra said of the transactions in a note to investors.

Chandra also noted that the all-cash bids are higher than the all-time highs of both companies.

Anadarko fell $2.93, or 6 percent, to $45.46, and Kerr-McGee gained rose $18.44, or 37 percent, to $68.74 on the New York Stock Exchange.

New Orleans-based Energy Partners Ltd. said it will buy Stone Energy Corp. for $1.4 billion. EPL will acquire all of Lafayette, La.-based Stone Energy stock for cash and stock at the option of the shareholder.

Energy Partners Ltd. rose $1.07, or 6 percent, to $19.09, and Stone Energy rose 80 cents to $47.03 on the New York Stock Exchange.

The shares of other independent oil and gas companies trading on the Nasdaq jumped on the news.

Parallel Petroleum Corp. rose $1.77, or 9 percent, to $21.66; Double Eagle Petroleum Co. gained $1.04, or over 7 percent, to $15.15; and Carrizo Oil & Gas Inc. increased $1.90, or nearly 7 percent, to $30.24.

Also gaining on the news were Blue Dolphin Energy Co., which rose 36 cents, or 9 percent, to $4.24, and Petrohawk Energy Corp., which climbed 48 cents, or more than 4 percent, to $11.31.

Oil climbs to $71 on strong US gasoline demand
Thu Jun 22, 2006


Oil climbed to $71 a barrel on Thursday after a smaller-than-expected rise in U.S. gasoline stocks reignited talk of resilient oil demand in the world's top consumer, moving inflation worries to the back burner.

U.S. light crude for August rose 64 cents to $70.97 a barrel, adding to gains of nearly a dollar on Wednesday, amid a gasoline-led rally.

European benchmark Brent climbed 65 cents to $69.82.

Gasoline jumped 3 percent on Wednesday after U.S. government data showed a 300,000-barrel increase in gasoline stocks, despite an increase in refinery utilization, against earlier expectations of a bigger 1.2 million barrel rise.

July gasoline was up 2.04 cents at $2.0864 a gallon by 0910 GMT.

"Over $3 a gallon for gasoline in the U.S. is not really making any damage in demand. This is a strong sign," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures.

U.S. gasoline demand over the past four weeks stood at 9.41 million barrels per day, up 0.9 percent from a year ago.

"In all, the rumors of the demise of U.S. demand seem to be premature," Barclays Capital said in their weekly report.

The market shrugged off a 1.4 million barrel rise that pushed U.S. crude oil stocks to their highest in eight years. The build was concentrated mainly in the U.S. West Coast, which statistically is less significant than the energy-hungry East and Gulf coast regions.

DEMAND CONCERNS EASE

The data partly quelled concerns that tighter U.S. monetary policy and moves in China to curb growth could dampen demand in the world's two largest oil customers, although figures from other big consumers have painted a fuzzy picture.

In Japan, the world's third largest oil user, crude imports in May plunged by more than a quarter versus April as refiners shut down for heavy spring maintenance, while supplies were down only 2.7 percent from a year ago, government data showed.

But South Korea's domestic oil product demand rose during that same month, the first sign of growth in Asia's fourth-largest consumer this year.

The demand-supply equation remains fragile and prices have held in a $68-73 band for more than six weeks, resisting much sharper falls in other commodity markets as oil-specific geopolitical concerns limit the impulse to sell.

Tensions over Iran were rekindled on Wednesday when U.S President George W. Bush said Iran was taking too long to respond to proposals to halt its nuclear enrichment program.

Bush's comment came after Iranian president Mahmoud Ahmadinejad said Iran would respond by August 22 to a U.S.-backed package of incentives offered early this month.

Iran, the fourth biggest oil exporter, was given an unofficial mid-July deadline to reply to the offer.

Oil rose toward $70 on Wednesday after U.S. gasoline supplies rose less than expected and on crude supply worries.

U.S. light crude for August was up 31 cents at $69.65 a barrel by 1536 GMT. London Brent crude was up 28 cents at $68.36.

Government data showed U.S. gasoline stocks rose 300,000 barrels last week, much less than the 1.2 million barrels analysts polled by Reuters had expected.

"The EIA's gasoline data showing a smaller than expected build looks supportive," said Tom Bentz, analyst at BNP Paribas commodity futures in New York.

"The crude numbers were higher than expected, but the market thinks gasoline is more important at this point."

The U.S. is in the midst of the summer driving season, when gasoline demand peaks.

U.S. gasoline futures rallied 4.94 cents to $2.0550 a gallon.

The inventory data showed U.S. crude oil stocks rose 1.4 million barrels, confounding expectations for a fall of 200,000 barrels.

Oil has held its ground even as other commodities have plunged under the combined pressure of potential U.S. rate rises and moves to curb rapid growth in China.

The measures could dampen demand for raw materials, including oil, from the world's top two energy consumers.

But with the Atlantic hurricane season barely underway, a quarter of Nigerian oil output closed by rebel attacks and continuing tension between the West and OPEC's second biggest producer Iran, few traders are brave enough to sell oil down.

ranian President Mahmoud Ahmadinejad said on Wednesday Tehran would respond by August 22 to international proposals seeking it end uranium enrichment. U.S. President George W Bush responded this seemed a long time for a reasonable answer.

"Traders seem hesitant to push crude prices higher but there are few signs that a substantial downturn is imminent," said Geoff Pyne at ABN AMRO.

"The apparent invincibility of the global economy to high prices is being called into question. Against this though, there are still legitimate fears."

The effect of high energy prices has done little to dampen rapid global expansion. Strong economic growth has hidden the impact of rising energy costs, analysts say.

"It is often remarked that the World economy has done well in the face of the steep oil price increases of the last three years," said Don Eggington of Daiwa Institute of Research in a report.

"This is true but this does not mean that there have been no effects. Indeed had there been no oil price increases since 2002 the major economies of the world would have been noticeably better off with higher GDP and lower prices."

Rising energy costs have hurt current accounts and public sector deficits in the major economies, Eggington said.

Japanese drivers have cut back on gasoline consumption due to high prices, and this was expected to continue through July. Imports of gasoline in July to the world's third largest energy consumer were expected to come in well down on the same-month last year.

China was expected to import 50,000 barrels per day less crude than contracted from the world's largest exporter Saudi Arabia in July and August.

Oil prices held firm around $70 on Monday after shedding 2.4 percent last week, with dealers weighing more positive signals from Iran on its atomic program.

U.S. light, sweet crude rose 5 cents to $69.93 a barrel on Monday, taking pause after last week's volatile ride.

Oil slumped to a more than three-week low of $68.10 last Wednesday amid a commodity and equity sell-off sparked by inflation concerns, but later recovered in tandem with other markets after a more dovish message from the Federal Reserve.

While U.S. growth worries may continue to niggle oil market speculators, most traders will be focused on Iran as they await its reaction to a package of incentives from global powers meant to end the months-long standoff over its atomic agenda.

"With the Iran issue hanging around you can't really take too negative view of (the market)," said David Thurtell of the Commonwealth Bank of Australia. "I think oil could drop $6 to $7 if Iran gives up its nuclear processing ambitions and I think it will. It's just trying to extract some incentives."

Iran's Foreign Minister Manouchehr Mottaki on Sunday said a "positive atmosphere" may help bridge the gap with world powers over its nuclear program, but did not say when Tehran would respond to the Security Council powers plus Germany.

"The positive atmosphere that has been created ... could create the best opportunity to pave the way to reaching an understanding," Mottaki said on state television.

Iranian President Mahmoud Ahmadinejad on Friday said the package was "a step forward" but also said Iran would not be concerned by possible sanctions if it rejected the June 6 offer.

The West believes Iran's uranium enrichment could be used to make nuclear weapons. Tehran says it is purely for power generation and civilian use.

Oil now sits in the middle of the $68-$73 range that has contained it since early May, pressured by worries about slowing growth and underpinned by real and threatened supply disruptions that pushed prices above $75 a barrel in April.

REFINERY HICCUPS

Refinery upsets may also help keep gasoline prices supported as dealers gauge how record-high rates at the pump have affected holiday plans in the world's biggest consumer, where gasoline use accounts for more than one-tenth of world oil demand.

A gasoline-producing fluidic catalytic cracking unit at Exxon Mobil's 563,000 barrel per day (bpd) Baytown, Texas, refinery -- the largest U.S. refinery -- shut down on Friday, according to a regulatory notice on Sunday.

The unit, one of three cat crackers at the refinery, had been going through an overhaul that began in May and was expected to end this week with the unit's return to production. It had two malfunctions, including a shutdown, in April.

Gasoline edged 82 points or 0.4 percent lower to $2.0300 a gallon on Monday.

NEW YORK, June 16 - Oil rose on Friday after comments from Iran's president welcoming a proposal to defuse the standoff over Tehran's nuclear work failed to ease concerns about crude supplies from the OPEC nation.

Iranian President Mahmoud Ahmadinejad called the proposal by the West a "step forward," but gave no sign when an answer would come. Worries the dispute may cut supply from Iran helped oil hit a record high above $75 in April.

"I think that the fact that we are still hovering in the $70 range tells you the market doesn't think this is fully resolved," said Jason Schenker, economist for Wachovia Bank, "It hasn't priced the Iranian situation out yet."

U.S. light sweet crude (CLc1) rose 20 cents to $69.70 a barrel by 1818 GMT, after trading as low as $68.80 earlier. London's Brent crude (LCOc1) gained 25 cents at $68.70 a barrel.

Oil rallied alongside gold and equities after U.S. Federal Reserve Chairman Ben Bernanke toned down his warnings against U.S. inflation, and said oil prices had had a limited impact on the economy.

Federal Reserve Board Governor Donald Kohn said on Friday U.S. inflation expectations had "come a little bit unhinged" in recent months and that the central bank would look for ways to better anchor them.

U.S. crude has largely traded between $68 and $73 since early May, pressured by worries about slowing growth and underpinned by real and threatened supply disruptions.

'ENCOURAGING'

Ahmadinejad, markedly more upbeat about the proposal on a trip to China than he has been at home, said Iran was examining the offer of incentives for Tehran to stop enriching uranium.

He also warned Iran would not be concerned by possible sanctions if it rejects the June 6 offer.

Oil hit a record $75.35 in April on concern the row over Iran's nuclear work could lead to a cut in Iran's oil exports and as violence shut down a quarter of output in Nigeria.

U.S. Energy Secretary Sam Bodman on Friday called Ahmadinejad's initial positive comments "encouraging."

The West believes Iran's uranium enrichment could be used to make nuclear weapons. Tehran says it is purely for power generation and civilian use.

Oil gained on Wednesday and Thursday, aided by data showing a fall in U.S. crude inventories as refineries ramped up operations to meet peak gasoline demand in summer.

Commodities and oil fell earlier in the week on worries that inflation would lead to higher interest rates, slowing economic growth and energy demand.

Overall, oil prices are up nearly 13 percent up so far this year and stand at their highest, in real terms, since 1980. They have surged from $20 a barrel at the start of 2002.

Crude prices fell Friday after good news about supply from the United States and Russia and lack of negative news from global tension points brought prices down from brief highs over $70.

Prices were initially spurred higher by concern over oil-rich Iran. U.S. and European officials in Vienna urged Tehran on Thursday to freeze uranium enrichment and stop withholding information about its nuclear program. The chief U.S. delegate to the International Atomic Energy Agency, Gregory L. Schulte, warned that if Iran remained defiant it could face "the weight of the Security Council."

Iran's supreme leader Ayatollah Ali Khamenei said his country "will not succumb to these pressures." But the chief Iranian delegate to the IAEA, Ali Ashgar Soltanieh, said they were prepared to negotiate.

After rising above $70 in earlier trading, light sweet crude for July delivery fell 40 cents to $69.10 a barrel in midday trading Friday on the New York Mercantile Exchange. August Brent crude on London's ICE Futures exchange fell 37 cents to $68.08 per barrel.

"The market's really waiting for Iran's response," to an international offer of incentives in return for talks, said David Thurtell, commodity strategist with the Commonwealth Bank of Australia in Sydney. "More conciliatory remarks from both Iran and the U.S. will definitely ease the market."

Positive supply news came this week from Russia and the United States.

PVM Oil Associates in Vienna said Russian oil exports will likely rise by around 5 percent in the third quarter while oil company BP PLC was expecting production at the Thunder Horse and Atlantis oil fields in the Gulf of Mexico would start on time in the second half of this year after initial fears of delays.

In London, David Dugdale of MFC Global Investment Management said "a slower global economy could put downward pressure on oil prices later in the year.

"On the other hand, the oil markets seem more preoccupied for now with supply disruptions, both real (Nigeria) and feared (Iran and the hurricane season in the Gulf of Mexico)," he said.

Militants in Nigeria are hindering output by some 500,000 barrels a day, about 20 percent of the African nation's usual daily production.

Oil prices were also boosted by natural gas futures, which surged more than 9 percent after the U.S. government reported that natural gas storage grew less than market-watchers had anticipated.

The threat of hurricane season and unseasonably high temperatures in some parts of the United States are raising expectations for high gas and power demand in the coming months. Still, natural gas supply is at its highest level ever for this time of year.

Natural gas futures fell nearly 9 cents Friday to $7.12 per 1,000 cubic feet.

Gasoline futures fell more than 4 cents to $1.9975 a gallon, while heating oil prices fell 1.69 cent to $1.92 a gallon.

The average U.S. price of a gallon of regular, unleaded gasoline has been slow to pull back, edging slightly lower to $2.891 Friday - down half a cent from a day earlier, and down nearly 4 cents from a month ago, according to AAA's daily fuel gauge report.

On Thursday, OPEC's secretary general, Sheik Ahmed Fahd Al Ahmed Al Sabah of Kuwait, said the Organization of Petroleum Exporting Countries won't cut its current output ceiling until oil prices stabilize. But this move might not be sufficient to curb price pressures.

"We need to see much better growth in OPEC's supplies, otherwise supply's not going to keep up with world demand," said Thurtell. "The market's vulnerable to supply outages, whether they come from hurricanes or civil strikes."

Crude prices fell Friday after good news about supply from the United States and Russia and lack of negative news from global tension points brought prices down from brief highs over $70.

Prices were initially spurred higher by concern over oil-rich Iran. U.S. and European officials in Vienna urged Tehran on Thursday to freeze uranium enrichment and stop withholding information about its nuclear program. The chief U.S. delegate to the International Atomic Energy Agency, Gregory L. Schulte, warned that if Iran remained defiant it could face "the weight of the Security Council."

Iran's supreme leader Ayatollah Ali Khamenei said his country "will not succumb to these pressures." But the chief Iranian delegate to the IAEA, Ali Ashgar Soltanieh, said they were prepared to negotiate.

After rising above $70 in earlier trading, light sweet crude for July delivery fell 40 cents to $69.10 a barrel in midday trading Friday on the New York Mercantile Exchange. August Brent crude on London's ICE Futures exchange fell 37 cents to $68.08 per barrel.

"The market's really waiting for Iran's response," to an international offer of incentives in return for talks, said David Thurtell, commodity strategist with the Commonwealth Bank of Australia in Sydney. "More conciliatory remarks from both Iran and the U.S. will definitely ease the market."

Positive supply news came this week from Russia and the United States.

PVM Oil Associates in Vienna said Russian oil exports will likely rise by around 5 percent in the third quarter while oil company BP PLC was expecting production at the Thunder Horse and Atlantis oil fields in the Gulf of Mexico would start on time in the second half of this year after initial fears of delays.

In London, David Dugdale of MFC Global Investment Management said "a slower global economy could put downward pressure on oil prices later in the year.

"On the other hand, the oil markets seem more preoccupied for now with supply disruptions, both real (Nigeria) and feared (Iran and the hurricane season in the Gulf of Mexico)," he said.

Militants in Nigeria are hindering output by some 500,000 barrels a day, about 20 percent of the African nation's usual daily production.

Oil prices were also boosted by natural gas futures, which surged more than 9 percent after the U.S. government reported that natural gas storage grew less than market-watchers had anticipated.

The threat of hurricane season and unseasonably high temperatures in some parts of the United States are raising expectations for high gas and power demand in the coming months. Still, natural gas supply is at its highest level ever for this time of year.

Natural gas futures fell nearly 9 cents Friday to $7.12 per 1,000 cubic feet.

Gasoline futures fell more than 4 cents to $1.9975 a gallon, while heating oil prices fell 1.69 cent to $1.92 a gallon.

The average U.S. price of a gallon of regular, unleaded gasoline has been slow to pull back, edging slightly lower to $2.891 Friday - down half a cent from a day earlier, and down nearly 4 cents from a month ago, according to AAA's daily fuel gauge report.

On Thursday, OPEC's secretary general, Sheik Ahmed Fahd Al Ahmed Al Sabah of Kuwait, said the Organization of Petroleum Exporting Countries won't cut its current output ceiling until oil prices stabilize. But this move might not be sufficient to curb price pressures.

"We need to see much better growth in OPEC's supplies, otherwise supply's not going to keep up with world demand," said Thurtell. "The market's vulnerable to supply outages, whether they come from hurricanes or civil strikes."

Oil Rises Above $70 as Economic Growth May Bolster Fuel Use

June 15 -- Crude oil rose above $70 a barrel in New York as robust economic growth in the U.S. and China, the two biggest oil consumers, may bolster fuel demand.

A report from the Federal Reserve Bank of New York suggested that manufacturing in the state is rebounding. First-time claims for unemployment benefits in the U.S. fell last week, a separate report showed. Chinese industrial output rose 17.9 percent in May, the most in two years, a government report showed yesterday. The U.S. and China consume 33 percent of the world's oil.

``We've been trending higher but prices picked up with the release of economic data,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Increased economic growth implies stronger fuel demand.''

Crude oil for July delivery rose 96 cents, or 1.4 percent, to $70.10 a barrel at 10:50 a.m. on the New York Mercantile Exchange. Prices are up 26 percent from a year ago. Oil reached $75.35 on April 21 and 24, the highest since New York trading began in 1983. Futures touched $68.109 yesterday, the lowest since May 22.

``Prices pulled back on economic jitters but it now appears that some of those worries were overblown,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The figures from China are showing that the economy and fuel demand are booming. Oil below $70 now looks like a good buying opportunity.''

China imported 19 percent more crude oil in May than a year earlier, bringing in 12.4 million tons, the Customs General Administration said June 12.

Natural Gas Inventories

The climb accelerated after a government report showed that U.S. inventories of natural gas rose by 77 billion cubic feet to 2.397 trillion cubic feet last week. The gain was less than the median forecast for an increase of 86 billion cubic feet, according to a Bloomberg survey of 18 analysts.

Some manufacturers and utilities can switch between oil- based fuels and natural gas depending on costs.

Kuwait, the Organization of Petroleum Exporting Countries' fifth-biggest oil producer, expects prices to stabilize between $65 and $70 a barrel, the nation's Oil Minister Sheikh Ahmad Fahd al-Sabah said in New Delhi today. The minister is accompanying Kuwait's Emir Sabah al-Ahmad al-Sabah on an official visit to India this week.

OPEC will continue to ensure supplies of oil to the world so that economic growth is not stunted, Sheikh Ahmad said. The producer group has kept output targets unchanged at 28 million barrels a day for 10 months.

Iranian Cooperation

Iran, the fourth-biggest oil producer, has reduced cooperation with United Nations atomic agency inspectors since the announcement of a U.S.-backed offer of incentives tied to the shutdown of nuclear-fuel production, European Union diplomats said today. Oil has risen 14 percent this year in part on concern that Iranian shipments may be cut as nuclear tension increases.

``Cooperation with the agency has been reduced to almost nothing,'' said Francois-Xavier Deniau, the French ambassador to the UN's International Atomic Energy Agency in Vienna. He was delivering a statement on behalf of the EU.

Brent crude oil for July settlement rose 82 cents, or 1.2 percent, to $67.80 a barrel on the London-based ICE Futures exchange. Futures touched $74.97 a barrel May 2 and 3, the highest since the contract began trading in 1988.

Oil rises above $69 after U.S. crude stocks drop


SINGAPORE, June 15 - Oil prices picked up above $69 on Thursday as refineries in the United States lifted production and drove down crude stocks.

U.S. light sweet crude futures rose 35 cents to $69.49 a barrel by 0300 GMT, after gaining 58 cents on Wednesday, though losses for the week remain at 3 percent. London Brent crude edged up 4 cents to $67.02 a barrel.

U.S. crude stocks fell 900,000 barrels last week as refiners increased runs to the highest level since before last year's hurricanes slammed into the U.S. Gulf, government data showed, surprising analysts who expected an average 100,000 barrel drop.

"Refiners continued to put pedal to the metal thanks to firm refining margins," said Alexandre Kervinio of SG Commodities. "But (gasoline) demand is getting increasingly swamped by supply."

Gasoline stocks jumped 2.8 million barrels, nearly triple expectations, while distillate fuel stocks also rose 2.1 million barrels, providing a more comfortable supply cushion for peak summer driving demand.

Other commodities such as copper also steadied after a sell-off earlier this week that came as investors' aversion to risk and a desire for liquidity pummeled financial markets.

Oil, the biggest component of several major indexes used by investors to gain commodities exposure, has been dragged down as well, though risks persist over Nigerian supply, the Atlantic hurricane season and Iran's nuclear dispute with the West.

Dealers are waiting for Tehran's formal response to a package of incentives offered by world powers in an attempt to end the stand-off over its atomic programme, which has heightened concerns over Iran's crude exports and Gulf supplies.

The 35-nation board of the International Atomic Energy Agency

(IAEA) meets in Vienna on Thursday to debate the dispute, but no resolutions are expected.

The first tropical storm of the Atlantic hurricane season, Alberto, had briefly supported prices early this week, but faded from the market's radar completely after making landfall in northwest Florida on Tuesday, safely east of oil infrastructure.

The U.S. oil industry has better back-up plans than last year in case of another damaging hurricane season in the Gulf of Mexico, BP Plc , one of the region's largest producers, said on Wednesday.

Supply disruptions in Nigeria, where a quarter of production has been shut by militant attacks, and in Iraq are still supporting prices.

Iraq is considering reopening an oil export pipeline to Syria that was shut at the start of the U.S.-led invasion in 2003, its Oil Minister Hussain al-Shahristani told Reuters on Wednesday.

Prices remain nearly 14 percent up so far this year, keeping the Organization of the Petroleum Exporting Countries (OPEC) on edge about higher inflation and a switch to alternative energies that could undermine future demand for crude.

KUALA LUMPUR, June 12 - A shortage of equipment will not be a constraining factor for energy projects in the medium term but a lack of engineering staff is a serious problem, head of world's top oil services firm Schlumberger Ltd. said on Monday.

"The only real constraint is the availability of people with experience and education," Andrew Gould told an industry conference. "It's the result of underinvestment in new talent."

Exploration firms say a tight oil services sector, such as rig and construction firms, is adding to the difficulties and costs of developing projects to increase oil production.

Gould said a lack of equipment could be solved in a short time frame, but the cyclical nature of the industry, with thousands of jobs shed in recent years, hampered recruitment.

"A shortage exists at all levels," Gould said, adding that U.S. universities were producing a fraction of engineering graduates compared with previous years, despite overall student numbers rising.

Gould said these technology-savvy youngsters were needed in an industry that could see companies increasingly drilling for oil from the office.

"New automation and communication technologies are likely to provide part of the answer," he said. "If we can drill holes on Mars, there's no technical constraint."

New York, June 10 ........Oil prices rose by more than USD 1 a barrel on Friday, reversing a three-day decline. Brokers attributed the rise to tough talk from an Iranian cleric and the kidnapping of a senior Iraqi petroleum industry official - proof that the killing of al-Qaida's leader in Iraq did not mark the end of instability in that country.

Also, a Nigerian government official said more than 800,000 barrels a day of the country's oil production was shut - about 60 per cent more than previously reported _ because of violence in the Niger Delta, Dow Jones Newswires reported.

Meantime, Valero Energy Corp. experienced a "total power failure" at its 240,000-barrel-per-day Aruba refinery Wednesday night, a spokeswoman said today, adding that it would be at least two weeks before the plant would be operating at "reduced rates".

Fimat USA oil broker Mike Fitzpatrick said the oil market is staring at a "wall of worry" that includes strong global demand, geopolitical unrest and the Atlantic hurricane season.

Light sweet crude for July delivery was up USD 1.10 to USD 71.45 a barrel on the New York Mercantile Exchange. In London, Brent crude was trading at USD 69.90, up 85 cents on the ICE Futures exchange.

Nymex gasoline futures were up more than 5 cents to USD 2.1575 a gallon, while heating oil prices rose almost 3 cents to USD 2.0130 a gallon. Natural gas prices increased by 10 cents to USD 6.294 per 1,000 cubic feet.

The cost of crude is roughly 30 percent more than a year ago, and US gasoline pump prices average USD 2.90 a gallon.

Oil prices jumped Friday amid news that gunmen kidnapped Muthanna al-Badri, a senior Iraqi oil official in Baghdad, as he was returning home from work.

Crude Oil Falls as U.S. Inventories Rise, Iran Considers Plan

June 8 -- Oil fell for a third day in New York after a report showed U.S. oil and gasoline stockpiles increased and as Iran considered incentives to end its nuclear research.

Crude oil supplies unexpectedly rose last week as imports surged to a 10-month high and gasoline demand eased, the Energy Department said yesterday. Oil has gained 16 percent this year amid concern Iran, the fourth-largest oil producer, may cut exports rather than comply with United Nations demands to stop its uranium enrichment program.

``The crude stocks are holding up very strongly'' and gasoline demand is starting to weaken, said David Thurtell, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Oil is going to lose some serious ground,'' should Iran accept a compromise over the incentives plan.''

Crude oil for July delivery fell as much as 32 cents, or 0.5 percent, to $70.50 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $70.52 at 9:14 a.m. in Singapore. Prices today are 34 percent higher than a year ago.

The July contract fell $1.68, or 2.3 percent, to $70.82 a barrel yesterday, the biggest decline since May 24. Oil reached $75.35 on April 21, the highest since trading began in 1983.

Iran has been given until the end of the month to accept a package of trade, diplomatic and technology incentives in return for stopping enrichment, Agence France-Presse reported, citing a Western diplomat it didn't identify.

``We are going to carefully study them,'' Iran's official IRNA news agency quoted Foreign Minister Manouchehr Mottaki as saying yesterday. ``We prefer cooperation to confrontation.''

U.S. Gasoline Supply

New York oil futures haven't closed below $70 a barrel since May 24. Gasoline demand in the U.S., the world's biggest oil consumer has peaked in June or July in eight of the past 10 years, according to Energy Department data.

``If the Iran situation calms down, we are looking at oil in the mid $60s,'' Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis, said yesterday. ``You have ample inventories, slowing economic growth and high prices are starting to bite.''

Gasoline for July delivery declined 1.9 cents, or 0.9 percent, to $2.105 a gallon in after-hours trading. It fell 5.48 cents, or 2.5 percent, to $2.124 yesterday.

Gasoline supplies rose for a sixth straight week, gaining 1.1 million barrels to 210.3 million barrels in the period ended June 2, 0.8 percent less than the five-year average, the report showed. An increase of 1.5 million barrels was expected, based on the median forecast from a Bloomberg survey of 17 analysts.

Demand Easing

Implied daily gasoline demand was at 9.37 million barrels a day, down 0.7 percent from a nine-month high the week before. Demand the past four weeks averaged 9.3 million barrels, up 0.7 percent from a year earlier, the department said.

``The gasoline demand numbers show year-on-year growth is pretty soft,'' Commonwealth's Thurtell said. ``These high prices are starting to hit home.''

Gasoline pump prices have averaged about $2.50 a gallon over the past year, up from about $1.98 a year earlier, according to Energy Department data. Regular grade gasoline cost an average $2.88 at the pumps on June 6, according to AAA, the largest U.S. motoring club.

U.S. crude-oil supplies rose 1.1 million barrels to 346.6 million, 4.2 percent higher than a year earlier. A decline of 500,000 barrels was forecast by analysts. Imports climbed an average 39,000 barrels a day to 10.9 million, the highest since the week ended Aug. 5.

``The huge import numbers are sending a bearish signal to the market,'' John Kilduff, vice president of risk management at Fimat USA in New York, said yesterday.

Oil production by the Organization of Petroleum Exporting Countries increased an average 130,000 barrels a day to 29.78 million barrels last month, according to a Bloomberg News survey of oil companies, producers and analysts.

OPEC Output

OPEC, which pumps 40 percent of the world's oil, is ``not comfortable with prices at the present levels,'' President Edmund Daukoru told a meeting with the European Union in Brussels yesterday. ``OPEC has been doing its very best to ease the situation and will continue to do so.''

Still, Saudi Aramco, the world's biggest oil company by output, yesterday raised its July prices for light oil grades to Asia and Europe, and cut prices for shipments to the U.S.

Saudi Arabia's oil production fell to 9.1 million barrels a day in April because of weak demand, the Wall Street Journal reported June 5, citing oil minister Ali al-Naimi.

``OPEC and the Saudis aren't really interested in seeing significantly lower prices,'' Commonwealth's Thurtell said. ``There's enough people with storage who would take it if it was at the right price.''

Oil rose on Monday after major exporter Iran warned that flows from the Gulf, which pumps nearly a quarter of the world's crude, would be endangered if Washington made a "wrong move" over Iran.

The remarks from Supreme Leader Ayatollah Ali Khamenei raised fears the world's fourth biggest oil exporter might halt crude shipments over its nuclear standoff with the West.

Iranian officials previously have said Tehran would not use oil as a weapon.

U.S. crude traded 32 cents higher at $72.65 a barrel in afternoon activity after touching $73.84 earlier trading. London Brent rose 53 cents to $71.56.

"The threat, whilst remote, would be serious in the context of global oil markets operating with little more than 2 million barrels per day of spare capacity," a Citigroup report said.

Tension between Iran and the West over Tehran's nuclear program has helped drive oil's 20 percent rally this year.

U.S. Secretary of State Condoleezza Rice reacted to Khamenei's comments by counseling a wait-and-see approach.

Washington offered to join European countries in talks with Iran about its atomic work, but said Tehran must first suspend uranium enrichment. Iran so far has rejected the demand, saying enrichment is a national right.

President Mahmoud Ahmadinejad said Saturday Iran would consider proposals on incentives to stop nuclear work from the United States, Russia, China, France, Germany and Britain but insisted the crux of the package was unacceptable.

EU foreign policy chief Javier Solana was to present the proposals to Iran Tuesday.

Oil prices were also boosted by production problems at U.S. refineries during the start of peak summer fuel demand.

"Every bump in refinery operations and every tropical storm will keep gasoline prices quite bullish, relative to crude oil," PFC Energy said in a report.

The disruptions came at the start of what was expected to be another busy storm season in the U.S. Gulf, where hurricanes last year wrecked refineries and drove oil to record highs.

OPEC producers agreed last week to leave output limits unchanged and keep pumping at near full rates in a bid to ease prices, which they worry will spur inflation that could slow economic growth and sap oil demand.

OPEC linchpin Saudi Arabia said it cut output to 9.1 million barrels a day in April due to a drop in refinery demand, not a desire to lower stock levels, the Wall Street Journal quoted Oil Minister Ali al-Naimi as saying.