Oil at 10-week high above $57

[notiCIas]

Oil at 10-week high above $57

Prices extend week-long rally; strong demand shows no sign of letting up despite near-record costs.

June 17, 2005: 5:57 AM EDT


LONDON (Reuters) - Oil prices leapt to their highest level since early April early Friday, climbing to more than $57 a barrel and extending a week-long rally spurred by strong demand in defiance of near-record fuel costs.

U.S. crude oil for July delivery climbed 59 cents to $57.17 a barrel in electronic trading. The contract had earlier reached a session high of $57.25, which was the strongest level since early April when the front-month U.S. contract reached an all-time peak of $58.28.

IPE Brent futures for August also climbed to the highest level since their early April record of $57.55, trading 43 cents higher at $56.65.

(Click here for crude prices.)

Heating oil prices earlier this week traded at a rare 11-cent premium to gasoline.

That premium was eroded after U.S. weekly inventory data showing a decline in gasoline stocks swung the focus back to motor fuel, which accounts for more than 10 percent of global oil demand.

On Friday, heating oil began again to outpace gasoline, climbing by 2.76 cents to $1.6531 a gallon, while U.S. unleaded gasoline rose by 1.61 cents to $1.6139.

With U.S. crude oil inventories still nine percent above last year dealers are less worried about raw material supplies than a thin cushion of spare production capacity.

Strong demand from China, as well as from the United States, has increased strain on the world's limited refining capacity, triggering concerns supplies -- particularly of distillates -- will be tight during the winter, when demand peaks.

The Organization of the Petroleum Exporting Countries (OPEC) this week agreed to raise its production ceiling by 500,000 barrels per day (bpd) from July and put another 500,000 bpd on the market soon if prices remain high. (Is OPEC irrelevant? Click here.)

But Saudi Arabia, the only member with significant production capacity to spare, appeared wary of forcing more crude onto refiners who say they have more than enough.

"We are ready to supply more crude," Saudi Oil Minister Ali al-Naimi told Reuters. "But get us the customers."

The United States has not built a new refinery since 1976.