Oil Futures Briefly Surge on Rumors of Iranian Naval Clash
Nymex crude oil futures briefly shot up more than $5 to trade above $68 a barrel on rumors about Iran, traders said.
Prices pulled back to give back the majority of those gains before 6 pm New York time.
The U.S. Navy on Tuesday said it had no information to substantiate a market rumor that Iran had fired at a U.S. naval vessel in the Gulf.
"Navy has nothing to substantiate that report right now," a Navy official said. "At this juncture, there is no validity to it."
"We have no information at this time that indicates any incident taking place," said White House National Security Council spokesman Gordon Johndroe.
Late Tuesday Reversal
Oil regained its footing late in Nymex trading Tuesday after hovering below open most of the day, finishing marginally higher and gaining ground for the sixth straight session.
The late rally came as traders closely watch ongoing threats to stability within the Persian Gulf region that have analysts foreseeing little chance of any deep falls in oil's price.
Iran held 15 British sailors on Friday, a day before the United Nations imposed new sanctions on the world's fourth biggest oil exporter because of its nuclear program.
British Prime Minister Tony Blair said Tuesday, without elaborating, that Britain is prepared to move into a "different phase" of the standoff with Iran if negotiations with the oil-rich nation failed to result in the release of the British sailors.
So far there has been no disruption to Iran's daily shipments of around 2.2 million barrels.
"We see little that could dent the advance in energy prices over the next few days, as a bullish combination of fundamental and technical factors seems to be firmly entrenched," said Edward Meir of Man Financial.
Technical analysts at Barclays Capital, who study charts to determine future price direction, saw support for U.S. oil at $61.75 and $60.35. "While underpinned by these levels, we expect
an overthrow of the year highs," they added.
A strike by workers at the French Mediterranean oil terminal of Fos-Lavera, now in its 14th day, has begun to hit refinery output just as the market prepares for summer gasoline demand.
It was U.S. gasoline that led Monday's charge, striking a seven-month high amid refinery snags and as analysts forecast data due for release on Wednesday to show a 2.3 million-barrel drop in stocks of the motor fuel last week.
BP reduced rates to the 175,000 barrels per day (bpd) gasoline-making unit at its refinery in Indiana, the fifth largest in the United States, following a small fire on Thursday, trade sources said.
Gasoline production in Europe, a supplier to the United States, may suffer if the Fos-Lavera strike drags on. Several refiners have already announced they have cut output.
"Specifically, a total of seven refineries representing approximately 1 million barrels per day of capacity (7% of total European refining capacity) could be forced to lower refinery runs significantly," Merrill Lynch analysts said.
Striking workers were due to vote later on Tuesday on a draft agreement to end the stoppage.