Oil prices touched a 10-month high on Friday sparked by worries of low US fuel supplies from creaking refineries and an upsurge of violence in the Middle East. It was the third day of gains after a weekly US report on Wednesday showed gasoline stocks failed to build up and heating oil inventories fell.
That sparked concern US refiners, running at 89 percent of capacity, would be have a hard time making enough fuel during prime vacation driving season. "Gasoline is very strong because refinery runs are at 89 percent and stocks are below average," said Christopher Bellew, senior vice president, Bache Commodities."
Brent crude, now the contract most representative of the global market, last settled 11 cents higher at $71.47 a barrel, after hitting $71.88, the highest level since August 2006. US crude settled 35 cents higher at $68.00 after hitting a fresh nine-month high. Markets were rattled further after Hamas fighters took control of Gaza after six days of civil war.
Dealers weighed the potential of a wider conflict drawing in neighbouring Middle East states, which pump a quarter of the world's oil. Tension was already high over supply disruptions in Nigeria, Iran's atomic programme and low supplies of gasoline in top fuel consumer the United States.
US gasoline stocks were running about 6 percent below a year ago following a prolonged stretch of refinery outages, while heating oil inventories slumped to levels one-third below last year. "Both markets are very bullish," said Makoto Takeda, of Tokyo's Bansei Securities. With oil demand rising, the stage was set for even further tightening, according to the International Energy Agency (IEA).
The adviser to 26 industrialised countries has repeatedly called on the Organisation of the Petroleum Exporting Countries to pump more crude to avoid a supply crunch later this year. Opec insists the problem lies mostly with US refinery bottlenecks. The 12-member producer group said on Thursday that current supplies were sufficient and there was no need to boost output at the moment.
Oil is up from about $50 in January though it remains below the all-time highs hit in 2006. Nearly a year ago, US crude reached a record $78.40 on fears that fighting between Israel and Lebanese Hizbollah guerrillas could spread to Middle East oil producers.