Oil Prices Hover Under $65 as Gasoline Looks to Extend Rally

U.S. crude oil futures were slightly higher in choppy trading on Friday, attempting to extend Thursday's RBOB gasoline-led rise as refinery snags and sluggish inventory gains keep supply concerns in focus.

"Crude and products futures are mixed in strong overnight trading, with unsurprising profit-taking seen in RBOB and Brent futures while NYMEX crude continues to add to gains made yesterday," said Addison Armstrong, analyst at TFS Energy in a research note.

London's Brent crude, already trading the July contract as front month, was lower but near $70 a barrel as Nigeria's recent production glitches in the turmoil-plagued OPEC member nation continue.

"Just a little end-of-week profit taking, especially after yesterday's rally. But prices could easily resume the up trend," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

On the New York Merchantile Exchange June crude was up 7 cents, at $64.93 a barrell. U.S. crude jumped $2.31 on Thursday.

London Brent crude was down 53 cents, or 0.75 percent, at $69.74 per barrel, trading from $69.70 to $70.35.

U.S. gasoline futures was up 2.70 cents, or 0.11 percent, at $2.4096 per gallon, trading $2.4066 to $2.4392.

Earlier prices rose on news of a glitch at Murphy Oil had shut a crude distillation unit at its 120,000-bpd refinery in Meraux, Louisiana, for maintenance. Murphy later said it would restart the CDU later Thursday.

Oil prices will rise further because the market is concerned about constrained gasoline supplies for the U.S. market ahead of peak summer demand, Hojjatollah Ghanimifard, international affairs director of National Iranian Oil Company, said in a report by Iran's ISNA news agency.

Those comments came after the oil industry's lobby cited high crude oil prices as the main factor behind soaring gasoline prices in testimony to Congress this week.

Late Thursday, Valero Energy Corp.said that a vapor release in Complex 7 of the East Plant at its 340,000-barrel-per-day refinery in Corpus Christi, Texas, had no material impact on production.

Credit Suisse raised its second-quarter forecast for London Brent and WTI crude oils, citing a tighter refined product market. The company now sees Brent trading at $66 a barrel in the second quarter, up from $60.50. WTI is expected to be priced at $63 a barrel, up from $62.50.

Nigeria Lends Support

The continued loss of a slug of Nigeria's gasoline-rich crude has also lent support to prices, although gains were tempered by news on Thursday that Nigerian villagers had ended their occupation of a Royal Dutch Shell oil hub.

A company spokesman said on Friday Shell had resumed pumping crude oil through the pipeline hub in the Niger Delta. The protest at the Bomu pipeline manifold in the Ogoni area had forced Shell to shut down 170,000 bpd of production.

Citigroup analysts said oil company earnings would benefit from current high oil prices, with a knock-on effect on share prices in the sector.

"For the first time in 12 months there is an implicit upgrade to oil sector earnings - consensus oil prices are likely to have to move up and refining margins are also moving up," Citigroup said in a research note.

OPEC Secretary-General Abdullah al-Badri reiterated this week that the group saw no need to unwind its production cuts given the healthy state of crude oil inventories.

"The OPEC comments that the world is amply supplied, despite what the IEA said, is creating a certain amount of confidence around OPEC quotas not being changed," said Harrington.

Some oil traders were also keeping an anxious eye on violence in the Middle East, where Israel launched air strikes against Hamas security forces in Gaza.

Barclays Capital technical analysts said daily price momentum was bullish and set $65.40 and $66.40 as targets for U.S. oil.