Oil surged 3 percent on Thursday as a rash of refinery problems in the United States raised fears of a gasoline supply crunch when drivers hit the roads this summer. Adding to gains, the International Energy Agency said Opec has tightened output too much, threatening a deeper slide in oil stockpiles in the world's industrialised nations in the coming months.
US crude rose $1.84 to $63.85 a barrel while London Brent LCOc1> rose 88 cents to $68.72. US gasoline settled up 3.31 cents to $2.1918 a gallon, after hitting a fresh eight-month high of $2.1965 a gallon.
A handful of refinery problems, including a crude unit shutdown at Citgo's oil refinery in Lake Charles, Louisiana, fed worries US fuel suppliers will not be able to beef up gasoline stocks before vacation season, when demand peaks.
US gasoline inventories already have slumped more than 12 percent since early February due to low output from refiners, with several big plants undergoing planned shutdowns for maintenance.
Concern over fuel stocks in the United States comes against the backdrop of waning inventories in other big consumer nations, as the Opec oil cartel limits output. "Opec supply curbs since last autumn have coincided with two quarters of heavy OECD stock draws and output remains below the level needed to generate the usual spring crude stock build," said the IEA, energy adviser to 26 industrialised nations.
Opec agreed to cuts totalling 1.7 million barrels per day at two meetings late last year. The IEA said current Opec production could mean further tightening in stocks in the coming months, given little spare capacity and apparently sharp draws in commercial inventory since the last quarter of 2006.
The IEA report was "evidence that the market is continuing to tighten at a fast pace," Barclays Capital said in a note. Some analysts said a weakening dollar also might be a factor in rising oil prices with producers, who get paid in dollars, worried about the impact on their profits.
Crude prices are up over 25 percent from this year's low of $49.90 a barrel in January despite a 6 percent plunge in the past week as Iran released 15 British military personnel.
Traders are still keeping a close eye on tension between the West and Iran. The head of the International Atomic Energy agency said Iran was still at the initial phase of enriching uranium despite Tehran's announcement this week it had begun industrial enrichment.
But Mohamed Elbaradei stressed concern was focused on the intentions of the Islamic Republic, which the West suspects is trying to build atomic weapons. Iran says it only wants to generate nuclear power so it can export more of its oil and gas. Worries over Iran have helped lift London Brent to a record premium of around $6 a barrel this week against US crude.
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