Oil Rises Towards $66 Even as U.S. Inventories Increase
U.S. oil prices finished just below $66 Wednesday as U.S. warships put on a show of force off Iran's coast, coinciding with a United Nations agency report that said the Islamic republic had expanded its nuclear program.
U.S. data showed gasoline stocks rose last week by more than forecast, but analysts said inventories in the world's top consumer remained below average. With summer driving season and peak demand looming, refinery problems sent pump prices to a record $3.22 a gallon this week.
U.S. crude rose 26 cents or 0.4% to settle at $65.77 . London Brent crude settled up $1.08 or 1.5% at $70.60 a barrel .
June RBOB gasoline finished slightly higher after a volatile day of trading. The front month contract gained 0.41 cents or 0.2% to settle at $2.3104. It traded in a range from $2.2630 to $2.3272.
Nine U.S. warships carrying 17,000 personnel entered the Gulf Wednesday. Navy officials said it was the largest daytime assembly of ships since the Iraq war began in 2003.
They added Iran had not been notified of plans to sail the ships, including two aircraft carriers, through the Strait of Hormuz, a narrow channel in international waters off Iran's coast and a major artery for global oil shipments.
The International Atomic Energy Agency found in a report that Iran has expanded uranium enrichment activity, ignoring a U.N. Security Council deadline to stop it.
"The U.S. Navy is sending two aircraft carriers into the Gulf for training maneuvers, on the day of the IAEA Iranian report," said Olivier Jakob, analyst at Petromatrix.
"We are still of the opinion that this is more a symbolic show of force than anything else."
At the White House, a spokesman called the IAEA report "a laundry list of Iran's continued defiance of the international community." French President Nicolas Sarkozy was quoted as saying Iran must decide whether it wants to cooperate with the international community or face harsher sanctions.
A weekly snapshot of U.S. oil stocks showed gasoline stocks increased by 1.5 million barrels, exceeding the 1.4 million barrels forecast. But despite record high prices, year-on-year demand accelerated 1.2% over the past four weeks.
The Memorial Day holiday this weekend marks the start of the summer driving season in the United States.
"We need to build 2 million barrels per week for the next eight weeks to get within the bottom range of the five-year averages" for gasoline, said Nauman Barakat, senior vice president at Macquarie Futures USA. "There's an increase in (refinery) runs, but where are the barrels?"
Oil hit a nine-month high of $70.83 on Monday, lifted by strong U.S. gasoline and attacks on oil facilities in Nigeria, the world's No. 8 oil exporter.
Technical analysts at Barclays Capital put initial support for Brent at $69.10 and resistance at $71.
