Oil: US petrol demand stays strong

Oil rose above US$74 on Wednesday on strong demand for petrol from the world's largest energy consumer, the United States, and after an attack on a Nigerian oil plant further cut supplies from Africa's largest producer.

In Rome, world diplomats called for an urgent, sustainable ceasefire between Israel and Hizbollah guerrillas in Lebanon.

US crude rose 75 cents to US$74.50 a barrel by 1515 GMT. Brent crude was up US$1.12 at US$74.40 a barrel.

US weekly data showed a fall of 3.2 million barrels in petrol stocks, much more than the 200,000 barrels forecast among analysts polled by Reuters.

US petrol demand over the previous four weeks averaged 1.8 per cent more than the same time last year, as motorists took to the road for summer vacation undaunted by high prices. The US consumes around 40 per cent of the world's petrol.

"The data shows petrol demand continuing to stay strong at 9.6 million barrels per day, even with pump prices near record highs," said Phil Flynn, analyst at Alaron Trading in Chicago.

"The headline is still strong petrol demand."

Outages in the past week at plants feeding the United States have threatened petrol supply during the summer driving season.

There was a fresh attack on an oil facility in the world's eighth biggest exporter Nigeria, where a militant campaign has cut output by more than a quarter this year.

Italian firm Agip said an overnight raid on a flow station in the Niger Delta had caused a "significant decrease" in output. Agip normally exports 200,000 barrels per day through its Brass tanker terminal in Bayelsa.

The attack came two days after Nigeria's biggest foreign operator Royal Dutch Shell said a pipeline leak had cut 180,000 bpd of oil output. The cut took Shell's supply loss in Nigeria to 653,000 bpd.

"The market is extremely vulnerable to supply disruption," said Kevin Norrish of Barclays Capital. "It is not easy to make up for the loss of that type of crude."

High quality Nigerian crude is prized by US refiners looking to meet summer petrol demand.

CALLS FOR CEASEFIRE

Foreign ministers from the United States, the Middle East and Europe agreed at a meeting in Rome on Wednesday on the need for an urgent ceasefire and an international force under United Nations mandate to secure the border between Lebanon and Israel.

UN Secretary-General Kofi Annan said that it was important to include both Iran and Syria to reach an agreement to end fighting, while US Secretary of State Condoleezza Rice voiced "concern" about Iran's role in Lebanon.

Oil hit a record-high of US$78.40 a barrel almost two weeks ago as fighting erupted. Consumers are worried that the war could spread and endanger exports and shipping from the region that supplies almost a third of the world's oil.

But the price has since fallen around US$4.

"We think for the moment that we've probably seen the worse we're going to see in terms of an oil price response to the conflict," said Katherine Spector, global head of energy strategy at JP Morgan.

- REUTERS