Oil surged over 2 percent to nearly $75 a barrel on Thursday on strong demand and as fresh violence in Nigeria spurred supply concerns. London crude rebounded after slipping from earlier highs on US government data that showed crude supplies rising and refiners ramping up gasoline output to meet summer holiday driving demand.
London Brent crude settled up $1.70 at $74.75 a barrel, after reaching $74.93 in earlier activity, the highest level since Aug. 14, 2006. US crude settled up 40 cents to $71.81 a barrel, after trading as high as $72.35 - the highest level since August 25.In Nigeria, a rebel group responsible for many of the attacks on the country's oil industry ended a month-long truce, while an attack on a Shell oil rig in the delta served as a reminder of the supply risks there. Gunmen also kidnapped a 3-year-old British girl in the Nigerian oil city of Port Harcourt while she was on her way to school on Thursday morning.
"I think there is concern about the Nigerian kidnapping and geopolitics," said Stephen Schork, president of The Schork Report. "The market might be thinking this could bring things in Lagos to a head. I think the Brent market is really spooked by that."
Oil prices have risen to a series of 10-month highs over the past week on the prospect that rising demand from US refiners returning from extensive maintenance could rapidly deplete inventories that are at a nine-year high. "Demand is leading the way. It is set to increase steadily year-on-year. Global GDP growth is very robust and even if it slows, it is still growing," said Mark Mathias, fund manager at hedge fund Dawnay Day Quantum.
Earlier, US crude fell following data from the US Energy Information Administration that showed crude stocks rising unexpectedly by 3.1 million barrels last week because of hefty imports. Inventories of refined products such as gasoline and heating oil increased more than forecast.
"It's bearish on its face; crude inventories rose sharply, and gasoline and distillates inventories are also higher than forecast," said Bill O'Grady, assistant director of market analysis at A.G. Edwards, St. Louis.
Gasoline production hit the highest on record as US refiners raised crude runs to 90 percent of capacity from 89.4 percent a week earlier. Despite near-record prices, pump sales in the world's biggest market were robust ahead of the July 4 holiday when millions of Americans take to the road. Dawnay Day Quantum's Mathias said technical factors pointed to higher prices. "At a technical level, oil prices have positive momentum and the trend is up. I am looking for oil to test $80 again this year," he said.
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