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Crude Oil Prices Breach $70 a Barrel

Posted on: Thursday, 22 June 2006, 03:00 CDT

By SUI-LEE WEE

SINGAPORE - Crude oil futures rose above $70 a barrel Thursday after the U.S. government reported a smaller-than-expected build in gasoline supplies, just as refineries are ramping up production to meet peak fuel demand ahead of a major U.S. holiday.

The build in U.S. gasoline inventories was 300,000 barrels- significantly lower than the supposed 1.12 million barrels increase, estimated by analysts surveyed by Dow Jones Newswires. Gasoline inventories are now at 213.4 million barrels, about 1 percent below year-ago levels.

"The gasoline stocks were a little bit on the disappointing side," said David Thurtell, commodity strategist with the Commonwealth Bank of Australia in Sydney. "But it's still OK ... stocks are still remaining high."

Traders also shrugged off the bearish crude stockpile report. U.S. crude inventories rose 1.4 million barrels to 347.1 million barrels in the week ending June 16, according to the U.S. Department of Energy's weekly snapshot, putting them at their highest level since May 1998.

Distillate inventories rose 1.7 million barrels to 124.5 million barrels, more than 8 percent above year-ago levels.

Light, sweet crude for August delivery rose 23 cents to $70.56 a barrel in electronic trading on the New York Mercantile Exchange. Gasoline futures for July rose marginally to $2.0710 per gallon.

Refineries are trying to boost gasoline output during June in preparation for the Independence Day holiday on July 4, when demand rises. But analysts have noted that plant capacity has been reduced due to the damage from last year's hurricanes to Gulf coast refineries.

Meanwhile, Thurtell said it's too soon to call the energy market a gasoline-driven one, with "the worries about Iran and the hurricane season still dominating things."

The mood in the energy markets has seesawed in recent weeks, as traders try to gauge from the verbal sparring between Iran and the West the possibility of Iran - the world's fourth-largest oil producer and exporter - halting exports if provoked.

On Wednesday, Iran's president, Mahmoud Ahmadinejad, said his country will take until mid-August to respond to incentives to roll back its nuclear program, prompting President Bush to accuse Tehran of dragging its feet. A mid-August response would come more than two months after the presentation of the package of incentives, the cornerstone of attempts to resume deadlocked negotiations over Iran's nuclear ambitions.

Traders are also jittery about volatility in oil-producing countries-first in Norway, where dozens of key oil service workers went on strike after state-led mediation failed to settle a new contract and their employers threatened to retaliate by locking out roughly 2,500 more oil service workers; and secondly in Nigeria, where on Tuesday unidentified gunmen kidnapped two Filipino oil-industry employees of Petroleum Geo-Services, an Oslo, Norway-based oil-field services company.

In other Nymex trading, July heating oil futures fell marginally to $1.9365 a gallon, while July natural gas futures rose to $6.60 per 1,000 cubic feet.

Source: Associated Press/AP Online

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