NEW YORK – Oil prices rose more than 2 percent on Tuesday on worries that U.S. gasoline supplies may grow tight ahead of the coming driving season, and amid deeper supply disruptions in Nigeria.
U.S. crude rose $1.33 to $63.10 a barrel on the New York Mercantile Exchange, up $3 since last week, while London Brent rose $1.77 to $63.97 a barrel. U.S. gasoline futures shot up 12.27 cents, or 7 percent, to a five-month high of $1.866 a gallon.
The U.S. oil industry is phasing out the gasoline additive MTBE, banned in several sates for polluting water. Energy experts believe the shift could shrink fuel inventories and trigger regional disruptions.
"This is being driven by gasoline," said Bill O'Grady, an oil analyst at A.G. Edwards. "People are always bullish on gasoline in the run-up to summer driving season, but this year there is even more reason because of the specification changes."
The head of Valero, the largest refiner in the United States, said on Tuesday he expects the removal of MTBE to tighten stockpiles of gasoline this summer, potentially boosting prices.
U.S. gasoline supplies are running well-above average for this time of the year, but could draw down quickly, analysts caution.
Adding to U.S. gasoline worries, Hovensa LLC said it shut a gasoline-making unit at its refinery in St. Croix, U.S. Virgin Islands, a major source of gasoline to the U.S. East Coast. The shutdown adds to already-slow production from refiners undergoing seasonal maintenance.
In Nigeria, militant attacks have forced the OPEC member to shut in a total 556,000 barrels per day of crude, an upward adjustment of nearly 100,000 bpd since violence flared last month, the country's top oil official Edmund Daukoru said.
U.S. President George W. Bush stoked the fire on Monday by accusing key oil producer Iran of helping to foment violence in neighboring Iraq, just as the U.N. Security Council considers a tough approach to reining in Iran's nuclear ambitions.
The United States, Britain and France will brief all 15 members of the Council later on Tuesday, pushing for a statement that would call on Iran to stop all uranium enrichment-related activities, which they believe are linked to weapons-making.
The rebound in oil prices reverses a slide of nearly $4 last week after the Organization of Petroleum Exporting Countries vowed to keep pumping flat-out despite U.S. stocks reaching their highest levels since May 1999.
OPEC President Edmund Daukoru said on Tuesday the cartel wanted to keep U.S. crude between the upper $50s to lower $60s.
Earlier in the day, the International Energy Agency forecasted a 290,000 bpd slowdown in 2006 global demand growth due to high energy prices, briefly pulling prices into negative territory.
"While there is reason to expect prices to soften if everything runs smoothly, the reality is that limited spare capacity and a bumpy road ahead are likely to support prices for some time," the IEA said in the editorial of its monthly report.