Crude Oil Surges Above $55 on Supply Fears

Crude oil prices rose more than $1 a barrel Friday as global supply concerns were stoked by a terrorist attack in Saudi Arabia and refinery snags in the United States.

Light, sweet crude for June delivery jumped $1.19 to settle at $55.39 a barrel on the New York Mercantile Exchange (search).

Gasoline futures climbed 3.23 cents to $1.653 per gallon, reflecting pre-summer supply worries amid a rash of refinery shutdowns, including a decision by Valero Energy Corp. (search) to reduce output at its St. Charles refinery in order to perform maintenance. Heating oil futures rose 1.11 cent to $1.5451 per gallon.

In London, Brent crude for June delivery was up 96 cents at $54.97 per barrel on the International Petroleum Exchange.

"There is a general fear in the market that gasoline supplies will be very tight heading into the summer and glitches at U.S. refineries further exacerbate that issue," said Adam Sieminski, an oil price strategist at Deutsche Bank in London.

James Cordier, president of Liberty Trading Group in Tampa, Fla., disagreed. He said U.S. supplies of both oil and gasoline are "more than ample" and that the stubbornly high price of crude reflects broader concerns about demand growth in China and the ability of OPEC (search) to keep up.

"This is a global rally," he said. "If we were just to focus on U.S. inventories, we wouldn't be at $55."

Global demand is expected to average more than 84 million barrels a day in 2005, while spare output capacity is believed to be about 1.5 million barrels a day, most of it in Saudi Arabia.

The Department of Energy (search) said in its weekly petroleum supply report Wednesday that the U.S. supply of crude oil stood last week at 318.9 million barrels, or 8 percent above year ago levels. Gasoline inventories stood at 211.6 million barrels, or 5 percent above year ago levels.

In Saudi Arabia on Thursday, suspected militants linked to al-Qaida clashed with security forces, prompting fresh fears of a supply disruption from the world's largest exporter. Two extremists and two policemen were killed.

"Terrorism definitely factors into prices," said Tetsu Emori, energy analyst at Mitsui Bussan Futures in Tokyo.

In Paris, Norway's Oil Minister Thorhild Widvey warned an international conference of oil ministers that prices were unlikely to fall back, and could even keep climbing.

"When prices hit $50 a barrel, the view was that was unusual. However, prices are still around $50 and may rise higher," she said. "It's not just a price spike but a new price level."

Crude prices hit an intraday high of $58.28 at the beginning of April and remain roughly 45 percent higher than a year ago.

The U.S. government's weekly supply report has been a major factor influencing prices.

"People are looking at inventory data, especially gasoline. But if you compare the stocks with last year's levels, it remains quite healthy," Emori said.

Still, prices at pumps across the United States, the world's largest energy consumer, are above $2.20 a gallon compared to around $1.80 a year ago amid rising demand.