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Oil Trading Above $66 a Barrel

Posted on: Thursday, 30 March 2006, 12:00 CST

LONDON - The price of oil traded above $66 a barrel Thursday amid continued supply disruptions in the Gulf of Mexico and Nigeria, a U.N. standoff with Iran over its nuclear program and growing demand despite rising energy costs.

Light sweet crude for May delivery rose 25 cents to $66.70 a barrel on the New York Mercantile Exchange. Brent crude for May gained 50 cents to $66.05 a barrel on London's ICE Futures exchange.

Gasoline prices rose nearly half a cent to $1.9590 a gallon, while heating oil futures gained more than half a cent to $1.8585 a gallon. Natural gas futures climbed more than 6 cents to $7.520 per 1,000 cubic feet.

Top officials of the five permanent Security Council nations plus Germany urged Tehran on Thursday to freeze uranium enrichment, but a senior Iranian envoy defiantly rejected the call, saying his country's activities were "not reversible."

The meeting follows the agreement by the 15-member Security Council to ask the International Atomic Energy Agency to report back in 30 days on Iran's compliance with demands to stop enriching uranium.

Iran, the No. 2 oil producer in OPEC, has been referred to the U.N. Security Council over fears it may want to misuse its nuclear program to make weapons.

In the Gulf of Mexico, oil output is still down by 343,000 barrels per day because of damage that occurred during last summer's hurricanes Katrina and Rita. That is roughly 23 percent below pre-storm output levels.

Nigerian oil output also remains a concern. Royal Dutch Shell PLC, the largest foreign oil company operating in the country, has shut in nearly half of its Nigerian production and says it won't resume operations until the country is safe enough for its workers. Some 600,000 barrels per day of Nigerian production has been shut in, according to IFR Energy Services in New York.

Concern about gasoline was also affecting the market, with Barclays Capital saying gasoline could become the leader for oil prices in the coming months.

In its weekly petroleum report Wednesday, the U.S. Energy Department said gasoline inventories fell by 5.4 million barrels last week to 216.2 million barrels, about even with year ago levels.

Last week's decline in U.S. commercial gasoline inventories was the fourth in as many weeks, and came as refiners conducted maintenance on their facilities ahead of summer in the Northern Hemisphere, when fuel demand peaks.

The U.S. agency also said that motor gasoline demand averaged 9.1 million barrels a day over the last four weeks, which is up 1.3 percent from a year ago. The average U.S. retail price of gasoline is $2.50 a gallon, up 34.5 cents from the year before.

Source: Associated Press/AP Online

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