Oil prices settled above the psychologically important US$70 a barrel mark on Friday for the first time since August last year on worries about gasoline supplies in the heart of the US summer driving season.
Light, sweet crude rose US$1.11 to settle at US$70.68 a barrel on the New York Mercantile Exchange after rising as high as US$71.06 earlier in the session. Oil last closed above US$70 a barrel on Aug. 31.
Analysts have predicted for weeks that retail gas prices are bound to stop falling, and could even rise again, as demand picks up during the summer driving season. Demand is especially strong between the July 4 and Labor Day holidays.
Crude futures had fallen as low as US$67.77 on Tuesday, the day before a government report showed gasoline fell when analysts had been expecting a big build. That Wednesday report fueled the late week rally into US$70 territory.
The discovery of an unexploded car bomb in west London also boosted prices, analysts said.
Gasoline for July, which expired after the session closed, rose US$0.0275 to settle at US$2.2942 a gallon (US$0.60606 per liter) on the NYMEX.
Expiring futures often rise as traders who have sold the contract short are forced to cover their positions.
August Brent crude on the ICE Futures exchange in London rose US$0.89 to settle at US$71.41 a barrel on Friday.
In other NYMEX trading, natural gas prices rose US$0.118 to settle at US$6.773 per 1,000 cubic feet (US$0.2392 per cubic meter). On Thursday, the contract plummeted US$0.428 to settle at US$6.655 per 1,000 cubic feet after a government report showed natural gas inventories rose 99 billion cubic feet last week, more than analysts expected.
Heating oil futures for July, which also expired, rose US$0.0136 to settle at US$2.0319 a gallon (US$0.53677 per liter) on the NYMEX.
In the futures markets, prices have risen in recent weeks on concerns gas supplies are inadequate to meet summer driving demand. But as refineries finally start ramping up to meet that demand, traders also see demand for crude oil increasing.
The concerns were stoked on Wednesday when the US Energy Department's Energy Information Administration reported that gasoline inventories dropped 700,000 barrels in the week ended June 22. Analysts polled by Dow Jones Newswires had expected a 1.1-million-barrel gain.
But the EIA also reported a 1.8 percent increase in refinery utilization, higher than estimates of a gain of 0.8 percentage points.
Earlier in the year, an unusual number of refinery outages served as a bottleneck in the gasoline supply system, sending gasoline futures prices higher. At that point, oil followed gasoline higher in sympathy, traders said, even though crude stockpiles neared nine-year highs.
Now, as refineries come back online, oil prices seem less tethered to gasoline futures. Crude stocks are falling, reflecting growing demand for crude by refineries looking to crank out gasoline.
"The return to production of BP's Whiting, Indiana, refinery and Valero [Energy Corp]'s McKee plant in Sunray, Texas, are the fundamental factors helping to drive the crude market higher," Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, Connecticut, said in a research report.
Armstrong said the discovery on Friday of an unexploded bomb in a car parked near Piccadilly Circus in downtown London was also helping to support oil prices.
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