Oil, Gasoline Surge on Refinery Shutdowns; Brent Crude Tops $70
U.S. oil rose throughout the day and finished just shy of $65 a barrel as U.S. refinery breakdowns choked gasoline supplies in the world's top consumer just ahead of peak summer demand.
U.S. crude rallied $2.31 or 3.7% to settle at $64.86 . London Brent crude broke above $70.00 a barrel for the first time since Sept. 1.
Oil prices jumped after news of a glitch at Murphy Oil's Meraux, Louisiana, refinery and the shutdown of a gasoline pipeline in the U.S. Northeast. Both were expected to be repaired later Thursday, but the problems added to a string of refinery outages that has sapped U.S. gasoline supplies ahead of the summer driving season.
"The gasoline market is on a boil because of the string of refinery issues. Murphy is the latest one," said Jim Ritterbusch, president of Ritterbusch & Associates.
Despite record gasoline pump prices above $3 a gallon, there has been no let up in robust demand in the world's top consumer. More motorists than a year ago were expected to hit the roads during the May 26-28 U.S. Memorial Day weekend, the traditional start to the driving season.
"For a majority of drivers, the thought of driving less is simply out of the question," said Edward Meir of Man Financial Energy Group. "We don't think we have seen the last of the current gasoline spiral, and could very well see one more significant spike higher during the new few weeks."
Gasoline futures surged more than 10 cents before settling up 9.96 cents or 4.3% at $2.4366 . Heating oil futures rose 6.97 cents or 3.7% to settle at $1.9367 . It was the highest settle for heating oil since Sept. 1.
Stockpiles of gasoline in the United States are roughly 7% below a year ago after prolonged refinery maintenance and a rash of operational glitches slowed production.
U.S. imports of gasoline jumped recently to make up some of the shortfall -- rising to the fifth highest level on record at 1.5 million barrels a day last week -- but investors have taken little comfort.
"There's still a relatively low rate of refinery runs -- the current tightness in gasoline is unlikely to ease in the short term," said Makoto Takeda, analyst at Bansei Securities.
Oil's gains were tempered by news of the end to an occupation of an oil hub by Nigerian villagers that had forced Royal Dutch Shell to cut output by 170,000 bpd.
Militant attacks have shut nearly 900,000 bpd, or 30% of supply capacity, from Africa's biggest oil producer -- depriving refiners of crude prized as a feedstock for making gasoline.
The Nigerian disruptions, together with worries over Iran's dispute with the West and supply cuts by the Organization of Petroleum Exporting Countries, have pushed crude well above a January low near $50.
Consumer nations have called on OPEC to open the taps, but the group, which supplies a third of the world's oil, says it sees no need to act. Its next scheduled meeting is in September.
Abdullah al-Badri, the group's secretary-general, said OPEC was content with prices in their current range.
"I don't want to see a low price and I don't want to see a high price," he said on Thursday.