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THE NEW YORK TIMES: Oil Climbs Over $72 on US Refinery Woes, Nigeria

By REUTERS

NEW YORK (Reuters) – Oil climbed back to $72 a barrel on Friday, reversing a two-day slide, as problems at a handful of U.S. refineries and the kidnapping of foreign oil workers in Nigeria renewed concern about risks to supply.

U.S. crude oil rose $1.71 to $72.05 a barrel by 1810 GMT, having reached as high as $72.14. London Brent gained $1.33 to $70.72 a barrel.

Five oil refineries in Texas and Delaware reported outages since Thursday, most of them due to the impact of foul weather and lightning strikes — ramping up concerns over gasoline supply at the start of the summer driving season.

“At this time of the year you want all the refineries running,” said Bill O’Grady, analyst at A.G. Edwards. “The fact that there are these outages is a big deal.”

Valero said Friday it was restarting normal production at its Corpus Christi, Texas, and Delaware City, Delaware, refineries after brief weather-related outages. It added that repairs on its Port Arthur, Texas refinery, would cut into gasoline output for another 10 days.

Refining companies Citgo and Flint Hills also reported refinery production cuts in Corpus Christi, which was battered by severe thunder storms on Thursday.

U.S. gasoline futures jumped 7.58 cents, or more than 3.5 percent, to $2.2030 a gallon.

The kidnappings of eight workers in a raid on an oil rig off the coast of Nigeria on Friday added to concerns, and followed news on Thursday of a further cut to Nigerian oil output after a pipeline leak.

“Rather than Nigerian supply recovering, losses are deepening,” said Deborah White of SG CIB in Paris. “The geopolitical risks are on the supply side. Security is worsening in Nigeria and Iraq.”

In the night-time raid on a rig off the country’s coast, some 20 to 30 attackers fired shots as they boarded from four speed boats.Royal Dutch Shell said on Thursday it cut Nigerian production by 50,000 barrels per day due to a pipeline leak. The leak brings Shell’s output loss in Nigeria to 505,000 bpd, after militant attacks this year shut several facilities.

The Organization of Petroleum Exporting Countries, as expected, agreed in Caracas on Thursday to keep pumping close to full capacity. But prices held within sight of the record high of $75.35, hit on April 21, frustrating oil ministers worried that sustained high prices could slow economic growth.

Strong demand from the United States and China, a shortage of refineries to produce motor fuels, supply cuts in Iraq and Nigeria and the international dispute over Iran’s nuclear work have fed into a 4-1/2-year rally that has added $50 to the price of a barrel of oil.

Saudi Oil Minister Ali al-Naimi told reporters in Caracas that oil markets were “oversupplied and overpriced.”

In an interview with Arab daily Al Hayat, he said fundamentals did not support a price above $50 and forecast rising interest rates would hurt demand.

“Interest rates are rising and inflation is increasing. Attempts to control (inflation) today should raise interest rates. If interest rates rise, liquidity will decrease, which will affect demand for fuel,” Naimi said.

Prices had fallen by $2 on Wednesday after the United States offered to start talks with Iran, the world’s fourth biggest oil exporter, provided it suspended uranium enrichment.

But a top Iranian official said on Friday Tehran would not stop enrichment activities, despite international pressure.

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