Oil and gasoline futures jumped Thursday on concerns that U.S. refineries aren't making enough gasoline to meet domestic demand.
Those worries were fed by a government report Wednesday that showed refinery utilization fell 1.5% last week to 89.6% of capacity.
"That's the really big story," said Michael Davies, an analyst at Sucden Ltd., a commodities brokerage firm. "There are going to be concerns whether the U.S. can cope with gasoline over (the) summer."
Light, sweet crude for July delivery rose 97 cents to settle at $66.93 a barrel after venturing above $67 earlier in the day on the New York Mercantile Exchange. That was the front-month contract's first intraday move into $67 territory since September.
Gasoline futures for July inched up 0.23 cent to settle at $2.1927 a gallon on the Nymex.
Pump prices, on the other hand, continue to moderate. The average national price of a gallon of gas fell nearly a cent overnight to $3.131, down 9.6 cents from their late May peak.
In other Nymex trading, heating oil futures rose 0.27 cent to settle at $1.9764 a gallon while natural gas prices fell 25.5 cents to settle at $7.825 per 1,000 cubic feet. Natural gas in storage in the U.S. grew by 110 billion cubic feet last week, a government report said Thursday.
In London, July Brent crude futures rose 20 cents to settle at $71.22 a barrel on the ICE Futures exchange.
"The market is looking at the refinery utilization rates," said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.
Gas futures fell Wednesday after the Energy Department reported an unexpectedly large increase in inventories, analysts said. But, as is often the case, traders taking a deeper look at the report were seeing reasons to buy on Thursday, Saville said.
About 1.5 million barrels of that 3.5 million barrel gas increase occurred on the West Coast, whose gasoline distribution system is largely isolated from the rest of the country, Saville said.
That realization, coupled with the decline in refinery utilization, sent gasoline futures higher Thursday, he said.
And gas futures tend to set the pace for the entire energy trading complex, Saville said.
"Gasoline has been in control of this complex for a while," he said.
Other analysts were less certain that there was a single reason behind oil's sharp rise.
"This might just be a technical move," said Jason Schenker, an economist at Wachovia Corp.
"There's not much fundamentally happening," said Tom Kloza, an analyst at the Oil Price Information Service.
Saville said that in the absence of other news, traders were focusing on the inventory report's utilization rate, which at 89.6% is well below the 93% to 94% range analysts would prefer to see this time of year.
The U.S. has experienced an unusually high number of refinery outages this spring. Reports Thursday of a partial shutdown at a 60,000 barrel-per-day Delek US Holdings Inc. refinery in Tyler, Texas, and that Suncor Energy Inc. will shut part of a 246,000 barrel-per-day facility in Alberta for 50 days for maintenance, were the latest outages.
On Tuesday, Valero Energy Corp. said its gasoline production would be cut by a total of 65,000 barrels per day due to problems at two refineries.
"That's a lot of gasoline this time of year," Saville said. "People just kind of thought that we were over the hump here with these refineries ... and apparently we're not."