Oil above $63 ahead of U.S. stock data

By Janet McBride

LONDON (Reuters) – Oil climbed further above $63 a barrel
on Wednesday ahead of U.S. stock figures that could push prices
toward a new record high if the world’s biggest consumer is
seen to be drawing heavily on its fuel supplies.

Worries over disruptions to Middle East oil lingered as the
United States reopened its missions in top exporter Saudi
Arabia after a security threat forced their closure Monday and
Tuesday.

“The threat to U.S. installations in Saudi Arabia is just
the latest issue to roil sentiment and support crude oil while
U.S. refining stress supports the products,” analysts at Refco
said in a report.

“The energy futures markets backed off a bit on Tuesday but
unless the (U.S. stock numbers) are especially bearish we
expect the uptrend to resume,” the report added.

U.S. light sweet crude was up 55 cents at $63.62 a barrel
at 1246 GMT, short of Tuesday’s all-time high of $64.27. London
Brent crude was up 75 cents at $62.73.

With U.S. crude averaging above $53 a barrel for the year
to date, in real terms prices are still below the $80 a barrel
average of 1980, after the Iranian revolution.

FEELING STRAIN

A Reuters poll of analysts predicted a slight fall in U.S.
crude oil inventories as imports eased. Unexpected refinery
shutdowns and strong demand from motorists were seen pulling
down gasoline supplies. The stocks data is due at 1430 GMT.

“The U.S. statistics today are very important. A lot of
people will be looking at the crude import numbers, which could
be a wild card,” said Mark Keenan of MPC Commodity Fund.
“Gasoline is also a focus.”

Crude oil producers and refiners have struggled to keep up
with demand growth over the past two years, reducing the
cushion of spare capacity needed to make up for any sudden
shortfall, such as a disruption to exports from the Middle
East.

On Wednesday, BP said its Schiehallion North Sea oilfield
would be down until the end of the month as it repairs fire
damage. Unplanned closures and scheduled maintenance have cut
around 10 percent of North Sea output in August.

In the United States, where refinery problems have pushed
gasoline prices to historic highs, BP said it had shut a gas
oil hydrotreater at its Texas City refinery.

Tony Nunan, a manager at Mitsubishi Corp’s international
energy business in Tokyo, said crude prices of $65-$70 a barrel
were a distinct possibility as winter approached.

“It’s hard to be bearish in a market like this,” he said.

News late on Tuesday that the U.S. Energy Information
Administration (EIA) had made big cuts to its projections for
oil demand for the rest of this year and into 2006 did little
to dampen the bullish mood in Europe on Wednesday.

Nor did OPEC’s reiteration of its commitment to “reasonable
prices,” as both traders and the cartel say it is a shortage of
refining capacity, not crude oil, that has pushed prices up
more than 45 percent this year.