NEW YORK, (Reuters):
OIL PRICES rose another 2.6 per cent on yesterday as the government said U.S. fuel stocks have contracted further ahead of summer when demand for gasoline rises.
U.S. light crude rose 67 cents to US$29.17, extending a rally that has pushed prices up 15 percent in the last week. Benchmark London Brent blend for June delivery was up 85 cents to us$26.75 per barrel, hitting a six-week high.
Prices rose as the U.S. government said crude stocks fell 2.7 million barrels last week as refineries burned oil to pump out more gasoline for summer vacation driving needs.
Gains accelerated on news that a power outage had forced ConocoPhillips to shut a Lousiana refinery. US. refineries are running above 96 percent of capacity to meet demand, which will magnify the impact of unplanned plant shutdowns.
"The underlying market is firmer as stocks are lower than anticipated going into the driving season," said Steve Turner of Commerzbank.
Stocks of clean-burning reformulated gasoline, used in a third of the nation's pumps, are more than 20 percent below 2002 levels. U.S. crude stocks are some 40 million barrels, or more than 12 percent, below last year.
Oil prices have risen sharply from 5-month lows struck late last month as increased production from OPEC oil producers during the war in Iraq failed to rebuild U.S. inventories as much as expected.
Renewed concerns over security of Middle East supply has also boosted prices after Monday's suicide bombings in the world's largest oil exporter Saudi Arabia.
Oil prices hit 12-year highs near $40 before the war in Iraq but fell sharply as oil facilities escaped severe damage.
The International Energy Agency, advisor to 26 industrialized nations, said on Tuesday global petroleum product stocks held at refineries fell heavily in the first quarter this year as consumers hoarded ahead of war in Iraq.
EXPORT
Global supplies are being capped by the lack of supply from Iraq, which has not shipped oil since mid-March. While Iraq's oil production is recovering, no entity in Baghdad has the legal authority to export the oil. Washington wants to lift sanctions altogether, paving away for the resumption of Iraq's exports next month, but U.S. Secretary of State Colin Powell failed on Wednesday to win Russian support to end U.N. sanctions against Iraq.
The IEA said low stocks meant OPEC should not need to cut output when it meets next month, having agreed in April to eliminate extra pre-war output pumped to compensate for lost Iraqi exports.
OPEC member Indonesia said on Wednesday that there was no need for the cartel to change its output ceiling at an upcoming June 11 meeting if its basket of crudes stayed in a US$22-$28 per barrel target range. OPEC's basket was last valued at US$25.41.
