Oil: Price rises as dealers eye refinery demand

Oil prices vaulted briefly over US$60 a barrel on Thursday as dealers anticipated an increase in demand from US refiners trying to keep up with strong summer petrol consumption.

US light sweet crude for September delivery rose 83 cents to US$59.94 a barrel after hitting a high of US$60.15, within US$2 of the record hit earlier this month. London Brent rose 75 cents to US$58.76.

Dealers said the strength was tied to expectations the nation's refiners would push up their run rates to meet robust US petrol demand and keep distillate stockpiles topped off ahead of winter.

US petrol inventories fell last week by 2.1 million barrels with demand 2.4 per cent higher than a year ago, the Energy Information Administration said Wednesday. Distillate demand was also running strong at 3.6 per cent over last year.

"This leaves an opening for the legitimate claims of the bulls that crude production capacity and refining capacity can't keep up with the rate of oil demand growth forever," said Tom Mooney of Southeast Energy Inc.

Refineries, meanwhile, only boosted their production rates by 0.7 percentage points to 93.5 per cent, less than anticipated, leaving them additional room to take advantage of strong margins.

"US petrol refineries seem to be having trouble holding their runs up," said Deborah White, senior economist at S G Commodities. "The US refining complex seems to be weary and underperforming."

Price gains were tempered after the US government data Wednesday showed the tenth successive increase in distillate stockpiles, that helped to ease concerns that stocks of heating oil and diesel would not build sufficiently ahead of peak distillate demand in the fourth quarter.

Opec, which is pumping at the highest level for 25 years, has blamed stubbornly high oil prices on refining bottlenecks, rather than an overall shortage of crude.

Wednesday's US data showed that overall crude stocks had fallen by 2.3 million barrels in line with expectations, but at 317.8 million barrels they are still above the upper end of the average range for this time of year.

Analysts added that Wednesday's rig fire in India had reminded the market how vulnerable overstretched world supplies were to disruption.

Twelve people died and 367 were rescued after fire destroyed an oil platform off India's west coast.

Officials said on Thursday it could take a year to rebuild the platform that produced 110,000 barrels per day, or one sixth of the country's oil production.

- REUTERS