Sun, May 07, 2006 - Page 10 News List

Rise in US gasoline supplies push crude back above US$70

AP , LONDON

Crude oil futures crept back above US$70 a barrel after sinking more than US$4 a barrel during the previous two sessions because US government data showed an increase in gasoline supplies.

Prudential Financial broker Aaron Kildow said the pre-weekend buying was in response to the sharp selloff earlier in the week, though he predicted prices would drift lower again next week.

Light, sweet crude for June delivery on the New York Mercantile Exchange rose US$0.25 to settle at US$70.19 a barrel. The contract had fallen US$2.34 on Thursday, and US$2.33 on Wednesday.

June Brent on London's ICE Futures exchange gained US$0.66 to close at US$70.95 a barrel.

Gasoline futures, meanwhile, gained US$0.046 to close at US$2.0406 per gallon (US$0.5391 per liter). Kildow said thin volume exaggerated the increase in gasoline futures.

On Wednesday, the US Energy Department released a weekly report showing a supply rise as refineries boost output and demand flattens.

While NYMEX oil futures have fallen more than US$5 from their intraday peak of US$75.35 reached on April 21, prices remain roughly 40 percent higher than a year ago and analysts do not expect them to free-fall anytime soon given the high level of geopolitical tensions.

The most pressing source of anxiety in the market stems from the possibility that Iran, a key oil exporter, could cut supplies because of international pressure to modify its nuclear program.

Iran's state-run television reported on Friday that the oil ministry took a step toward establishing an oil trading market denominated in euros, rather than the dollar, by granting a license for the bourse. Trading on oil markets such as New York and London is conducted in dollars.

It was not clear who would trade on an Iranian market. Iranian television did not mention trading firms or governments willing to market or purchase products on the bourse, nor did it say when it would open for business.

Iranian legislators earlier this year urged the government to set up the market to reduce the US' influence over the Islamic republic's economy.

Besides tension over Iran, unrest in Nigeria, violence in Iraq and rising resource nationalism in South America have added to oil market worries.

Some 500,000 barrels per day of Nigerian production, most of it operated by Royal Dutch Shell PLC, remains off-line because of violence there, and more than 300,000 barrels per day remains shut down in the Gulf of Mexico since Hurricane Katrina battered offshore platforms in August.

Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.

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