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LONDON - Oil climbed above US$61 to its highest level this year today after top fuel consumer the United States reported an unexpected drop in petrol stocks and Iran said it would show "no weakness" over its nuclear programme.
US crude CLc1 was up 12 cents at US$61.07 a barrel at 1730 GMT. It earlier hit US$61.80, the highest level since Dec. 26, taking gains for the week to US$3.66 or 6.3 per cent. Some analysts had said a close above US$60.80 could presage further gains.
London Brent crude LCOc1 was up 38 cents at US$61.00.
Weekly US data yesterday showed a surprise 3.1 million-barrel fall in petrol stocks, unnerving investors ahead of the peak summer demand season. Nine tankers of European petrol are already headed to the United States and more are likely to follow to take advantage of higher US prices.
"The latest data suggests to us that the tightening dynamic which had emerged over the past few weeks is continuing," said Kevin Norrish, an analyst at Barclays Capital.
BNP Paribas noted that petrol stocks had fallen for a second week and at the same time "US petrol demand continued to show surprising strength."
More defiant words today from Iran's president, Mahmoud Ahmadinejad, also unsettled the market.
"If we show weakness in front of the enemy the expectations will increase but if we stand against them, because of this resistance, they will retreat," he said.
Tehran ignored a Feb. 21 United Nations deadline to stop enriching uranium.
The five permanent members of the UN Security Council plus Germany will meet next week to discuss possible further steps against the world's fourth-biggest oil exporter. Already the United Nations has imposed sanctions barring the transfer of nuclear technology and know-how.
Strength in energy is also part of a broader commodity rally, Petromatrix analyst Olivier Jakob noted, with corn, wheat, metals and sugar all on the march in recent days.
"The range on crude oil has now been broken and ... the positive momentum is back into oil and should attract further investment," Jakob said.
"With the path of the events drifting toward a more confrontational outcome we expect geopolitics, and Iran in particular, to remain an important supportive factor for oil prices going forward," said Norrish.
Dariusz Kowalczyk, chief strategist at CFC Seymour Ltd, agreed: "The risk is to the upside if the Iranian situation deteriorates a little bit, so just in case you buy."
Problems at some US refineries have also supported the market.
(Additional reporting by Osamu Tsukimori in Tokyo and Matthew Robinson in New York)
- REUTERS
