Oil: Price hits 2-month high as petrol rallies

NEW YORK - Oil rose to a two-month high near US$57 a barrel, paced by a rally in petrol as dealers focused on rising demand for transport fuels and a lack of new refineries to push up production.


US crude futures CLc1 settled up US$1.01 to US$56.58 a barrel after striking as high as US$56.90, the highest since early April, and less than US$1.40 from the record. London Brent LCOc1 rose 98 cents to US$56.22.


The gains lifted oil's spike this year to nearly 30 per cent, as surging demand for fuels like diesel and petrol stretch the world's refining industry.


US petrol led gains in the energy patch Thursday, jumping 3.53 cents to US$1.5978 a gallon -- bringing it closer in line with heating oil, which firmed 0.44 cent to US$1.6255.


US petrol demand tends to pick up in the summer as families take to the roads for vacations, and can account for more than 10 per cent of world petroleum consumption.


While petrol was in the spotlight Thursday, worries over demand for distillates like diesel and jet fuel have kept heating oil at an unseasonal premium over petrol.


US demand for distillates is up 6.5 per cent over the past four weeks compared with the previous year, more than double the growth in demand for petrol.


Diesel demand is also running strong in the United States, Europe and China, triggering concerns consumer countries will be ill-prepared for winter -- when demand peaks.


The gains Thursday add to strength after a US government report showed domestic crude inventories slipping unexpectedly last week as refiners ran near full-throttle.


US crude oil supplies fell 1.8 million barrels, but remain roughly 9 per cent over last year's levels thanks to robust imports, according to the US Energy Information Administration.


The market also brushed off an Opec deal to raise formal production by 500,000 barrels per day (bpd), or 2 per cent, starting July 1 and another 500,000 bpd of extra oil soon if prices remain high.


Members of the cartel said that refinery bottlenecks mean the deal is unlikely to reduce prices.


"We are ready to supply more crude," Saudi Arabia's oil minister, Ali al-Naimi, told Reuters. "But get us the customers."


He added, "There is no shortage of oil. It's there, what is driving the price is the inability to make the oil into products."


The United States, the world's largest energy consumer, has not built a new refinery since 1976.


- REUTERS