NEW YORK – Crude oil futures rose more than 3 percent to close above $54 a barrel Thursday on concerns about refinery disruptions due to Tropical Storm Arlene (search), and as traders looked ahead to next week's meeting of the Organization of Petroleum Exporting Countries.
Light sweet crude for July delivery rose $1.74 to settle at $54.28 a barrel on the New York Mercantile Exchange (search). Heating oil rose more 7 cents to $1.6256 a gallon, while unleaded gasoline gained more than 7 cents to $1.5730 a gallon.
On London's International Petroleum Exchange, Brent crude rose $1.67 to $53.78 a barrel.
Tropical Storm Arlene developed Thursday in the northwest Caribbean Sea, edging closer to western Cuba as the Atlantic hurricane season's first named storm. Arlene was expected to enter the Gulf of Mexico by Friday.
Total SA, ChevronTexaco Corp. and BP PLC said they have begun evacuating nonessential staff from off-shore facilities in the Gulf, according to Dow Jones, and Total said it will shut in production at three of its rigs Friday morning.
"It's adding to the bullish momentum in the market today," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago, noting that traders are worried about refinery shutdowns.
"Obviously there's no good time for a tropical storm, but it's especially critical right now ... if this disrupts any oil production, the world can't afford that right now," Flynn said.
Meanwhile, the president of OPEC (search) said the group seems to have agreed to keep production at current levels, but he also raised the possibility that the group could increase its ceiling by 500,000 barrels a day later in the year.
"Through my consultation with my colleagues, it looks like everybody is supporting keeping production unchanged," Sheik Ahmed Fahd Al Ahmed Al Sabah said.
"Maybe it will give the market a positive signal to stabilize prices and show there is a willingness from OPEC to secure supply for the third and fourth quarter," Dow Jones Newswires quoted him as saying in Brussels, Belgium.
Jason Kenny, an energy analyst at ING Financial Markets in London, said the market expected OPEC to maintain current output levels.
"If quotas look set to remain at this level in the last quarter, which already looks very tight, that could potentially offer a longer-term comfort," he said.
Al Sabah was among OPEC officials meeting in Brussels with the European Union's head office. The EU was expected to ask the group to raise oil production in an effort to pull down high crude prices.
Kenney voiced disbelief that the talks would yield that result.
"OPEC has a view on what OECD countries should to help themselves, such as increasing refinery capacity and improving energy efficiency," he said.
The U.S. Energy Department, in its latest petroleum supply report released Wednesday, said crude oil inventories fell last week by 3 million barrels to 330.8 million barrels. Inventories are still about 10 percent above year-ago levels.
The data also showed gasoline inventories fell by 100,000 barrels to 216.6 million barrels, but were still 6 percent higher than a year ago. The supply of distillate fuel, which includes diesel, heating oil and jet fuel, grew by 1.3 million barrels to 107.7 million barrels, easing fears ahead of an expected rise in second quarter demand.
"Most of the key components of the Energy Information Administration weekly oil report went against expectations," said Energyintel analyst David Knapp.
Refineries across the United States had pushed up output in recent weeks, contributing to the build in distillates, a premium when the Northern Hemisphere winter swings around.
OPEC Secretary-General Adnan Shihab-Eldin had also said Wednesday that the group was considering whether to raise output by a half million barrels a day. Some analysts are dismissing such a move, however, since OPEC is already producing above its quota and the only member country with the known ability to add barrels is Saudi Arabia.
OPEC members are currently pumping around 30.1 million barrels a day, above its official ceiling of 27.5 million barrels a day.
"Unless OPEC raises its quotas by the fourth quarter, demand will surely outpace supply," Kenney said.