Oil spikes, crude goes over $55

[notiCIas]

Oil spikes, crude goes over $55

Fear that sustained demand and refinery outages could strain gas supplies sent crude prices higher.

April 22, 2005: 11:47 AM EDT

LONDON (Reuters) - Oil prices jumped above $55 a barrel Friday as traders said sustained demand and refinery outages could strain U.S. gasoline supplies ahead of peak summer motoring demand.

U.S. light crude for June delivery $1.40 to $55.60 a barrel on the New York Stock Exchange, making a four-day rally that has added over $4 to prices.

Oil is 25 percent above levels at the end of 2004 and nearing the all-time peak of $58.28 struck earlier this month.

London Brent gained 78 cents to $54.79 a barrel.

A hefty surplus in U.S. crude oil inventories and signs that the Organization of the Petroleum Exporting Countries is boosting output again have done little to calm markets worried about insufficient transport and heating fuels to meet demand later this year.

"It's a product-led market," said Colin Tang, an oil trader with French investment bank Calyon in Singapore. "Physical crude is trading at big discounts to the major markers, which implies there's plenty of crude out there."

Dealers are increasingly anxious about oil product supplies, particularly in the United States, where a series of refinery glitches has raised fears that plants -- already operating near capacity -- may struggle to sate rising demand.

U.S. gasoline prices jumped nearly 4 cents on Thursday and edged higher 2.4 cents to $1.6440 a gallon on Friday. The premium of gasoline over to crude, the so-called crack spread, was at nearly $14 a barrel, up more than $2 from a week ago.

"If you believe the worldwide growth in the requirement for oil products will continue and on top of that you have finite refining capacity, then you have to say the cracks are the thing to own," Tang said.

Glitches
Traders said a gasoline-making unit at a ConocoPhillips' refinery in Louisiana would be down for another week after failing to restart following maintenance, adding to a spate of problems in Texas, Louisiana and Kansas.

Gasoline inventories in the world's biggest consumer are 5 percent higher than a year ago, but showed a surprisingly large drop last week, a time when supplies should be building ahead of the peak usage summer season that starts at the end of May.

Crude stockpiles fell last week, their first decline after a nine-week climb put them at the top end of their five-year range.

Crude stocks have been bolstered by OPEC efforts to top up inventories in the weak second quarter to create a buffer for anticipated stronger demand in the second half of the year.

Saudi Arabia has told customers it would increase output again in May after ramping up to 9.5 million barrels per day (bpd) last month. But even Oil Minister Ali al-Naimi conceded that the kingdom's ability to control prices had waned.

"Petroleum product markets are having a significant influence on crude prices at the global level, more so than at any time before," he said Thursday.

With the world straining to produce and refine enough oil to meet rapid oil demand growth in Asia, energy security is moving up the agenda for big consumers, including the United States.

The House of Representatives approved an $8 billion energy bill Thursday with long-term incentives to boost domestic production of crude oil, natural gas, coal, nuclear and other energy sources. The bill now moves to the Senate.