U.S. Oil Falls Over $1 as Summer Fuel Outlook Improves
Oil prices dipped as rising refinery production and a key pipeline restart eased worries of a U.S. fuel supply crunch this summer driving season.
Losses were limited, however, by new concerns over Iran's nuclear ambitions, after a document from the United Nations nuclear watchdog said on Wednesday that the key oil producer had begun making nuclear fuel underground.
U.S. crude oil futures for May delivery dropped about 2.5%, pressured by selling ahead of the contract's expiry on Friday. London Brent crude, currently seen as a better guide to world oil prices than U.S. crude, was down slightly.
Enbridge on Wednesday restarted a portion of a major pipeline carrying Canadian oil to the U.S. Midwest that had been shut after a leak on April 15.
The bearish news followed a U.S. government report showing refineries boosted utilization rates by 2 percentage points last week -- a sign fuel supplies will rise leading into peak summer driving demand.
"I think people are seeing that the supply response potential by refiners is going to be fairly strong," said Harry Tchilinguirian of BNP Paribas.
Also weighing on oil prices were signs Nigeria would restart oil fields shut for more than a year by militant attacks. Traders said on Thursday four cargoes were due to load from the Forcados fields in June.
Despite Nigeria's hopes of bringing back the Forcados output, traders were keeping a close eye on the West African country ahead of presidential elections on April 21, given fears that any major violence could add to oil industry disruption.
Diplomats said Iran's operation to produce nuclear fuel amounted to a test-scale operation, rather than producing meaningful amounts. Iran says it needs nuclear fuel to generate power but the West fears it could be used to make atomic bombs.
"Everyone's still concerned about Iran potentially, and low stocks in the U.S. Even if things looked a bit better yesterday, it is still a pretty tight market," said Helen Henton of Standard Chartered.
Adding support to oil prices was a report that the Chinese economy in the first quarter grew 11.1% from a year earlier of 2007, up from 10.4% the previous quarter.
China is the world's second largest energy consumer, behind the United States.
The strength of the growth, however, prompted concerns over further interest rate rises by the central bank, and that drove stock markets lower in China and further afield.