Oil briefly scaled a new 11-month high above $77 a barrel on Thursday amid increased flows of fund money, though gains were capped by news of refinery restarts in the fuel-hungry United States. London Brent crude, seen as the best indicator of the global market, settled up 96 cents to $76.40 a barrel after climbing as high as $77.07 earlier in the day, within reach of the record $78.65 hit August 8, 2006.
US crude was down 6 cents to $72.50 a barrel, keeping its big discount to the London benchmark due to robust stockpiles in the Midwest. "This (recent) rally is very much fund driven. ... The entry of long-only hedge funds into the market is a major factor this time around. We wouldn't rule out Brent hitting $80 this summer," said Graham Sharp, director and one of the funding partners at commodities trading group Trafigura.
Tighter supplies of oil from the North Sea over the summer due to oilfield maintenance and a recent pipeline problem also have helped Brent advance towards its all-time record.
A North Sea gas pipeline outage this month cut oil output from at least one group of fields, operator ConocoPhillips said. Chevron said the closure, which could last several more weeks, was affecting production from its Erskine oilfield.
Oil's gains were capped by a drop in gasoline futures after news BP was planning to restart key processing units at its Texas and Indiana oil refineries, signalling a continued rebound in gasoline stockpiles at the height of the US summer vacation season.US gasoline futures slumped 4 cents, or about 1.7 percent, to $2.2663 a gallon.
"Gasoline futures started going down on the BP Texas City news," said Phil Flynn, analyst at Alaron Trading in Chicago. US stockpiles of gasoline have been rising in recent weeks on strong imports and a recovery in refinery operations after a prolonged spate of maintenance and repairs since winter put inventories well-below normal.
Traders are awaiting the International Energy Agency's monthly report on Friday, expected to give the latest snapshot of global oil demand and stockpiles. The agency's medium-term oil market report released earlier this week warned that oil demand would rise faster than expected over the next five years while production lags.
Saudi Arabian oil minister Ali al-Naimi said the tightness in supply of oil products such as gasoline and international political tensions were pushing prices higher. His view was echoed by other members of the Organisation of the Petroleum Exporting Countries, who said they were ready to pump more crude, but saw no need to do so now, rebuffing calls from consumer nations for extra oil to lower prices that reached 11-month highs this week.
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