U.S. crude oil futures finished just short of $64 on Thursday as gasoline futures surged to new eight-month highs on troubles at two refineries. The production disruptions raised fears of a gasoline supply crunch when drivers hit the roads this summer.
Valero Energy's fire-damaged refinery in McKee, Texas, won't reach full capacity this year and ConocoPhillips shut several processing units for repairs at its Wilmington, California, refinery.
Crude prices were already about a dollar higher before the refinery news. Earlier, the International Energy Agency warned about slumping oil inventories in consumer nations following a large first-quarter 2007 supply drop.
Gasoline futures, which were nursing small losses, shot up to fresh eight-month highs on the news from Valero.
On the New York Mercantile Exchange, May crude rose $1.84 or 3% to settle at $63.85 a barrel, trading from $61.86 to $63.91.
In London, May Brent crude was also up, trading $67.78 to $68.68. The contract expires on Friday.
NYMEX May RBOB gasoline rose 3.31 cents or 1.5% to settle at $2.1918, near the the session peak of $2.1964 and the highest since $2.203 on Aug. 10, 2006. It earlier fell as low as $2.1371.
NYMEX May heating oil finished up 3.14 cents or 1.7% at $1.9061, trading $1.8680 to $1.9090.
The gasoline crack spread, the value of gasoline over crude when processed, shot back up to above $28, after lingering around $27.50 in the early afternoon. It hit a high of $28.94 on Wednesday.
The warning from the Paris-based IEA, the energy adviser to 26 industrialized nations came after U.S. oil inventory data issued Wednesday showed gasoline stocks fell for the ninth straight time last week, lifting gasoline futures to their highest price since August.
OPEC has been implementing production cuts totaling 1.7 million barrels per day, with 1.2 million bpd cut to be in effect Nov. 1 and another 500,000 bpd to be cut Feb. 1.
In the U.S., the head of the Energy Information Administration, Guy Caruso, said Thursday that domestic demand for crude oil won't weaken this spring and tight energy supplies could spell another year of $3-a-gallon retail gasoline.
The IEA report was "generally supportive as the falling output number come with relatively strong year-on-year demand growth," said brokerage house A.G. Edwards in St. Louis, Missouri.
"The counter-seasonal decline in stocks has significantly tightened the market ahead of summer demand. Additionally, OPEC spare capacity despite increasing remains limited," it said.
Consumer nation oil stocks posted the biggest first-quarter drop in a decade and may fall further in coming months, the IEA said Thursday in its April monthly report. It also shaved its 2007 world oil demand forecast by 250,000 bpd to 85.8 million bpd.
On Wednesday, the EIA reported that domestic gasoline stocks fell by 5.5 million barrels in the same week, slashing supplies to 199.7 million barrels.
Gasoline stocks have fallen 27.5 million barrels or 12% since the week to Feb. 2.
Crude oil stocks rose 700,000 barrels, while distillate stocks, which include heating oil and diesel fuel, edged up 100,000 barrels, the first rise in 11 weeks.
Demand for distillates rose slightly in the week to April 6 due to winter-like cold in the U.S. Northeast, going two weeks into spring. Cold weather is expected to prevail near-term in the region, with readings to average below normal during the next five days, forecaster Meteorlogix said on Thursday.
On the refining front, BP's Texas City, Texas, refinery's 120,000 bpd gasoline-making unit at the 460,000 bpd refinery had restarted as planned, after a power failure caused an outage on Thursday, an industry source said.
Citgo has shut a 120,000-bpd day crude distillation unit at its 425,000-bpd Lake Charles, Louisiana, refinery for unplanned maintenance, a source said. It was not known how long the
repairs would take, he said.