Oil Rises on Saudi Terror Arrests, U.S. Supply Worries

U.S. crude oil futures ended more than $1 higher on Friday, backed by another surge to new
eight-month highs by gasoline futures.

Gasoline rose for the eighth session in a row on worries that any more refinery glitches will cut already tight motor fuel supplies.

Worries over supply security also sent prices higher, analysts said, citing the arrest by Saudi Arabia of militants, some of whom were said to be training to attack oil facilities in the kingdom.

"We bottomed out around the time the Saudi news hit, and we've been working our way up since then," said Eric Wittenauer, analyst at A.G. Edwards in Chicago. "With the geopolitical tension, especially in the producer regions, it's hard to be short going into the weekend."

Earlier in the day gasoline had moved lower after Marathon Oil said late on Thursday that the fire at its 245,000 bpd refinery in Garyville, Louisiana, which affected a gasoline-making unit on Wednesday, had been put out and that the unit was in restart.

Even so, "the market is still nervous about possible refinery glitches ahead of the weekend," said a Midwest energy risk adviser.

On the New York Mercantile Exchange, June crude settled up $1.40, or 2.2%, at $66.46 a barrel . It hit a session high of $66.70, highest since March 28's $66.78. Resistance was broken at $66.40.

It posted the day's low at $64.58, with support at $64.15. The contract fell 78 cents on Thursday.

In London, June Brent crude ended up 76 cents, or 1.1%, at $68.41 a barrel, trading from $66.73 to $68.54 .

A video still from Al Arabiya TV, showing money discovered by Saudi security officials during raid on militants.
A video still from Al Arabiya TV, showing money discovered by Saudi security officials during raid on militants.

NYMEX May RBOB gasoline, which expires on Monday, jumped 7.1 cents, or 3.1%, to settle at $2.3613, the highest settlement since $2.3654 on Aug. 3. It hit a high of $2.365, highest since prices hit $2.4275, also on Aug. 3.

Resistance was overcome at $2.32. It traded as low as $2.685, with support at $2.1450.

"I believe there's a big squeeze, pre-expiry play on May RBOB gasoline ahead of expiration," said Tom Knight, a trader at Truman Arnold in Texarkana, Texas.

Gasoline stocks fell for the 11th consecutive week last week, midweek government data showed, leaving supply 15 percent lower than it was in the week to Feb. 2, amid a series of refinery troubles as units emerge from seasonal maintenance.

"Unless the market starts to see visual evidence of improving refined-fuel production, expect the (energy) market to remain firmly supported in the near term," the Midwest adviser noted.

NYMEX May heating oil gained sharply as well, ending 2.44 cents, or 1.3%, higher at $1.9135 a gallon, after trading from $1.87 to $1.9225. Resistance was breached at $1.9008, with support at $1.8870.

Saudi Arabia arrested more than 170 suspected al Qaeda-linked militants, some of whom were training as pilots to carry out suicide attacks on oil facilities in the kingdom, the Interior Ministry said on Friday.

Chakib Khelil, Algeria's oil minister, told reporters on Friday at a conference in Barcelona that crude oil supplies were not tight and gasoline stocks should rebound, once refiners return from maintenance.


He added that the Organization of Petroleum Exporting Countries did not need to hold an emergency meeting in June and he said geopolitical concerns have added $10 per barrel to
crude prices.

On Thursday, word from Iran's chief nuclear negotiator that Tehran and the European Union were nearing "a united view" in some areas of their talks regarding Iran's nuclear program helped pressure crude prices. But many traders remain wary and skeptical.

"They say one thing one day, and say something completely different the next," said one NYMEX floor broker.

Gunmen killed two policemen in a failed kidnap attempt on Friday in the Nigerian oil city of Port Harcourt, police said. The officers were escorting a convoy of vehicles carrying expatriate staff to work.