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NEW YORK - A steep slide in petrol stockpiles in the United States sparked concern of a potential supply crunch when drivers hit the roads this summer, boosting oil prices today.
The rising concern over fuel stocks came against the backdrop of simmering tensions between the United States
and oil exporter Iran, and production cuts by Opec.
Petrol futures on the New York Mercantile Exchange soared 2.2 per cent to an eight-month high of US$2.17 a gallon Wednesday after a government report showed inventories in the world's top consumer fell for the ninth consecutive week. EIA/S
Refinery outages, strong demand, and falling import levels have slashed US petrol supplies more than 12 per cent since early February, at a time of year the oil industry typically boosts storage for the summer driving season.
"With dynamics like these, US$3 retail petrol looks to be right around the corner," said Jason Schenker, economist at Wachovia Bank in North Carolina.
US crude oil CLc1 settled up 12 cents at US$62.01 a barrel, while London Brent LCOc1 rose 42 cents to US$67.84. US crude oil is up over 20 per cent from a 2007 low of US$49.90 in January, despite a 6 per cent fall over the past week.
US stock prices fell amid rising concern over energy prices, with the Dow Jones industrial average down 90.69 points to 12,483.16.
Iran tensions
Iranian tensions have helped lift London Brent crude to a record premium of around US$6 a barrel against US crude, which has been weighed down by relatively high stocks at the US storage hub at Cushing, Oklahoma.
A top Iranian official on Wednesday dismissed doubts over Iran's recent declaration it had begun industrial enrichment of uranium, a process the West believes could lead to making atom bombs rather than the nuclear fuel Iran says it needs.
Separately, the US military accused Iranian intelligence services of providing weapons to militants in Iraq and said gunmen were being trained in Iran in the use of lethal roadside bombs.
Adding support to crude markets, members of the Organisation of the Petroleum Exporting Countries have agreed to production cuts totaling 1.7 million barrels per day since last October.
Dealers were also watching robust demand growth in China. The world No. 2 oil consumer's crude imports for March jumped 8.9 per cent versus year-ago levels to a near record, government data showed Tuesday.
"You still have in the background a significant global tightening, which has been in progress all year," said Paul Horsnell of Barclays Capital, pointing to robust world demand without sufficient increase in supply to meet it.
- REUTERS