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Reuters: Oil, gasoline soar on supply worries

Thu May 11, 2006 3:43 PM ET

NEW YORK (Reuters) – U.S. crude and gasoline futures ended sharply higher on Thursday as kidnappings in Nigeria and refinery snags in the United States stoked supply worries even though inventories rose last week.

Crude for June delivery <CLM6> settled up $1.19 at $73.32 per barrel on the New York Mercantile Exchange.

In London, June Brent crude <LCOM6> rose 99 cents to $73.43 a barrel.

NYMEX June gasoline <HUM6> rose 5.02 cents to $2.2196 per gallon, while June RBOB <RBM6> gained 3.06 cents to $2.49.

June heating oil <HOM6> gained 3.17 cents to $2.0964 a gallon.

“Nigeria seems to be getting a lot worse and people have to take it a lot more seriously,” said Phil Flynn, analyst at Alaron Trading in Chicago.

Three foreign oil workers were kidnapped in Nigeria's oil capital Port Harcourt on Thursday, a day after a U.S. oil executive was killed in the same city.

The militant Movement for the Emancipation of the Niger Delta (MEND), which has waged a campaign of attacks against the oil industry in the world's eighth-largest exporter, said it was not involved in the kidnapping.

After a rollercoaster ride, gasoline futures ended up as refinery snags spooked traders before the summer peak driving season.

Two Valero refineries in Texas and Louisiana had problems with their coking facilities over the last week, according to trade sources, while ConocoPhillips' Bayway refinery in Linden, New Jersey, was also running at reduced rates.

The supply worries came despite increases in petroleum inventory last week reported by the U.S. Energy Information Administration on Wednesday.

U.S. gasoline inventories rose by 2.4 million barrels to 205.1 million barrels.

Refinery utilization rose 1.4 percentage points to 90.2 percent of capacity, increasing gasoline production by 323,000 bpd to nearly 9 million bpd.

Average gasoline demand over the past four weeks fell 0.1 percent from a year ago to 9.14 million bpd.

Crude stocks rose unexpectedly by 300,000 barrels to 347 million barrels, their highest in almost eight years.

OPEC will ship 520,000 bpd more oil in the four weeks to May 27 to 24.78 million bpd, said Roy Mason of consulting group Oil Movements.

“The major surge in exports showing up are because long-haul sailings from the Gulf will be arriving in the third quarter when crude runs peak during the summer driving season,” Mason told Reuters.

Venezuelan President Hugo Chavez said on Thursday he expected world oil prices to rise in the next few months as energy markets fret over U.S. tension with Iran and ongoing instability in Iraq.

International Energy Agency director Claude Mandil said on Thursday he was surprised record high oil prices had not had more impact in curbing demand.

“Maybe that's due to a time lag,” Mandil said. “It needs recognition by the general public that they have to save energy … It would be a good thing for demand to decrease.”

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