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Oil shoots past US$69 on supply fears

Oil prices on Thursday rose above US$69 a barrel ahead of the long weekend, as worries about possible supply disruptions overshadowed the news that US crude inventories are at their highest level in eight years.

Gasoline prices also rose, extending gains that have begun to trickle down to US consumers, who are now paying on average US$2.717 for a gallon of gasoline (US$0.7178 per liter), according to AAA's daily fuel gauge report on Thursday. That is up more than US$0.45 from a year ago.

"We're just in this terrific bull run right now, and the worries just steepen," said John Kilduff, analyst at Fimat USA. He added that as long as political tensions continue in Nigeria and Iran, crude futures next week are apt to break their previous trading record of US$70.85 a barrel, reached Aug. 30 after Hurricane Katrina struck the Gulf coast.

Light, sweet crude for May delivery rose US$0.70 to settle at US$69.32 a barrel on Thursday on the New York Mercantile Exchange, which was closed on Friday for the Easter holiday.

June Brent crude futures on London's ICE Futures exchange rose US$0.71 to settle at US$70.57 a barrel.

Nymex May gasoline futures rose US$0.0168 to settle at US$2.1079 a gallon, after rising as high as US$2.1119 -- a level not reached since early September. May heating oil rose nearly US$0.01 to settle at US$1.9831 a gallon.

Tom Bentz, analyst at BNP Paribas Commodity Futures in New York, said the crude oil market "could be in for at least some kind of correction."

But he added "we're still in a bullish uptrend" due to underlying support from various supply concerns -- the disruption of Nigerian crude supplies by rebels, the possibility of Iranian oil exports being halted due to political tension and domestic refineries having trouble turning enough crude into gasoline to meet consumers' needs.

In Nigeria, the world's 12th-largest oil producer, more than half a million barrels of crude a day are being blocked due to militant violence, and rebels have said they will target more supplies.

In Iran, the world's fourth-largest oil producer, no oil exports have been disrupted, but some market participants are worried they might be, depending on the UN Security Council's response to the Iran's defiance of council resolutions concerning the country's nuclear program.

Futhermore, as the summer approaches, not only are refineries still undergoing seasonal maintenance and recovering from last fall's hurricanes, they are also struggling with the prospect of tight ethanol supplies.

Ethanol is increasingly being blended with gasoline as refiners phase out their use of additive MTBE, which contaminates drinking water. The refiners have said they will stop using MTBE on May 5, when the federal requirement for a clean-air oxygenate is lifted as part of an energy law enacted last summer.

Inventories of crude oil rose in the past week to their highest level since early 1998, the US Energy Department reported Wednesday. It was the third straight weekly build in crude stocks.

Petroleum products shrank, as refineries were operating at only 85.6 percent. Gasoline stocks fell 3.9 million barrels last week to 207.9 million barrels, and distillates -- which include diesel and heating oil -- fell 4.6 million barrels to 117.4 million barrels.

Meanwhile on Thursday, natural gas rose about US$0.18 to US$6.990 per 1,000 cubic feet (US$0.2468 per cubic meter), after the Department of Energy reported that natural gas inventories grew by 19 billion cubic feet in the week ending April 7 to 1.7 trillion cubic feet -- slightly less than most analysts had expected.
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