Crude oil rose to an eight-week high as a nationwide strike aimed at ousting Venezuelan President Hugo Chavez limits shipments to refineries from the world's fifth-biggest oil exporter.
The US is "deeply concerned" about the deteriorating situation in Venezuela and is calling for early elections to end the 12-day strike, White House spokesman Ari Fleischer said.
Oil inventories in the US, the biggest consumer, were below year-earlier levels before the strike began. About 9 percent of the oil used by US refineries is normally supplied by Venezuela.
"There are going to be shortages," said Craig Gile, an energy-derivatives broker at Citibank NA in New York. "This is the last thing that's needed with the relatively tight inventories that we have. In the longer term, refiners will probably find alternative supplies but that will take a while to sort out."
Crude oil for January delivery rose US$0.43, or 1.5 percent, to US$28.44 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 18. Oil futures gained 5.6 percent this week, the biggest weekly rise since mid-August.
In London, the January Brent crude-oil futures contract rose US$0.34, or 1.3 percent, to US$27.21 a barrel on the International Petroleum Exchange.
The Venezuelan government and opposition groups have failed to find common ground in talks aimed at ending walkout. An international mediator, Organization of American States General Secretary Cesar Gaviria, said there's a "high risk of violence."
Chavez's term in office expires in 2006.
Tankers from the South American country take a week to reach Texas and Louisiana refineries, compared with more than a month from the Persian Gulf.
US crude-oil inventories fell 274,000 barrels to 287.1 million barrels in the week ended Dec. 6, the American Petroleum Institute said earlier this week. Supplies were down 7.8 percent from the same week last year.
Prices for US crude-oil grades that normally compete with Venezuelan oil are rising faster than futures prices. The rally signals that refineries are bidding to acquire substitute supplies to make products such as gasoline and heating oil, analysts said.
Sour MARS Blend crude oil from the Gulf of Mexico rose US$0.99, or 3.9 percent, to US$26.70 a barrel as of 12:34pm New York time, the highest price since Oct. 18, according to Bloomberg data.
MARS was priced at minus US$1.90 a barrel to West Texas Intermediate crude oil, the US benchmark, narrower than minus US$2.30 yesterday.
Poseidon crude oil, another sour grade from the Gulf of Mexico, rose US$0.99 to US$27.10 a barrel. Poseidon was trading at minus US$1.50 a barrel to the West Texas grade, narrower than minus US$1.90 yesterday.
Sour is a term indicating that the oil has a high sulfur content.
World demand for crude oil is highest during the cold-weather months in the Northern Hemisphere, when refiners boost heating-fuel production.
US refiners had expected Venezuela to be a reliable source of oil at a time when Persian Gulf supplies were at risk because of a possible US attack on Iraq.
Iraq's 12,000-page declaration of its weapons programs doesn't account for chemical and biological agents that were missing when US inspectors left the country four years ago, the New York Times said, citing American officials and UN diplomats.
The US has said it would disarm Iraq by force if President Saddam Hussein refused to cooperate with UN weapons mandates.
RSS