Oil prices jumped more than $1 to over $71 a barrel on Friday as US refinery problems spurred concerns about fuel supplies in the world's top consumer. US crude for October delivery settled up $1.26 to $71.09 a barrel, after a 57 cents gain on Thursday. London Brent crude rose 76 cents to $70.62 a barrel.
Traders said Chevron had declared force majeure on some crude purchases after a fire hit a crude unit at its 325,000 barrel per day (bpd) Pascagoula, Mississippi refinery earlier this month.
The refinery could be running at 50 percent for three to four months, traders said. The news pushed up crude and helped send US gasoline futures over 3 percent higher. "Gasoline is pushing up crude here," said Phil Flynn, analyst at Alaron Trading. "I also think gasoline had been oversold lately."
A shutdown of a 22,500 bpd gasoline-making unit at an oil refinery in Big Spring, Texas due to an equipment malfunction also helped boost gasoline. A string of refinery outages during the US summer gasoline season have helped support prices in recent months.
Oil has also been sensitive to weakness in world stock markets caused by concerns over the impact of troubles in the US mortgage market on the wider economy. Financial markets remain nervous about further fall-out from the US mortgage problems that could hurt consumer confidence. "The expectation that the US will slow was there before," said Frances Hudson, investment director at Standard Life Investments. "The question for most people is, if the US slows, how much can other places be insulated from it, can the real economy continue to make progress."
Oil hit a record high of $78.77 a barrel on August 1, but financial market turmoil caused by the US mortgage sector problems has pushed it lower.
The US mortgage crisis has spread to other markets in recent weeks and oil has been hit as investors, fearing a credit squeeze, have sold to raise cash. Prices have fallen further since Hurricane Dean missed Gulf of Mexico oil installations. Mexico's Gulf oil rigs have already restarted production in the Bay of Campeche after the hurricane shut in 2.65 million barrels per day (bpd) of the region's output.State energy monopoly Pemex, one of the top three oil suppliers to the United States, produced 342,000 barrels of crude oil in the region on Thursday.