Prices for crude oil and gasoline rose Friday on supply concerns ahead of the Memorial Day weekend, the kickoff to the summer driving season. Strikes and violence in Nigeria also propped up the oil market.
Light, sweet crude for July delivery is trading . It settled up $1.02 or 1.6% at $65.20. Gasoline futures jumped 4.68 cents or 2.0% to settle at $2.4037.
Tim Evans, an energy analyst at Citigroup Global Markets, said "the feeding frenzy" before Memorial Day has begun, but cautioned that the buying is "a psychological event rather than an economic fundamental one."
He expects the anxiety surrounding the driving season to ease after the weekend, since the strongest demand for gasoline historically doesn't start until late June, allowing inventories to build further.
"The idea of an 'official' summer driving season is really a myth. There is no ribbon-cutting ceremony that opens the interstates," Evans said. "We get all hot and sweaty over the idea the driving season is here when it's not really. It's a little further beyond the horizon than pop culture has us believe."
Far from any major relief for drivers, the average retail price inched down to $3.225 a gallon on Friday, the AAA said, but remains near the all-time high of $3.227 a gallon it hit the day before. The price is closing in on the inflation-adjusted peak of $3.29 a gallon reached in March 1981, according to the Energy Department.
A spate of new refinery outages this week at Valero Energy's McKee refinery in Sunray, Texas, and ConocoPhillips' Alliance oil refinery in Belle Chasse, Louisiana, also is keeping a floor under gasoline prices.
BP announced Friday it is restarting a 100,000 barrel per day unit at the Prudhoe Bay oil field in Alaska that has been offline since Monday. BP says full production should being restored by
Geopolitical worries in Nigeria and Iran continue to support oil prices.
Oil unions began a strike Thursday at Nigeria's state-owned oil company and threatened to target exports in hopes of reversing the sale of government refineries. The state oil company holds the majority stake in joint ventures with international oil companies that account for more than 90% of the country's oil exports.
Gunmen kidnapped six oil workers in southern Bayelsa, the latest in a run of more than 100 seizures of foreign workers this year in the oil-producing Niger Delta.
Meanwhile, Iran has expanded its uranium enrichment program, and the U.S. Navy is holding unannounced exercises off Iran's coast.
Traders and analysts fear any conflict between the U.S. and Iran could result in the closure of the Strait of Hormuz, through which tankers ship carry about 17 million barrels of crude oil a day, according to the U.S. Energy Information Administration.
Brent crude for July had initially spiked above $71 on Thursday after the Iran news. On Friday it slipped on the ICE Futures exchange in London, giving back some of the "substantial geopolitical risk premium" traders have built into the price, Evans said.
In other trading, heating oil futures rose 1 cent or 0.5% to settle at $1.9391 , while natural gas settled down 4.1 cents at $7.640 .