WASHINGTON – Oil prices jumped by almost $2 a barrel Friday after it was reported that eight foreigners working on a drilling rig off the coast of Nigeria had been kidnapped. Even though no output was affected, the news reignited concerns about the stability of supplies in the oil-rich African nation.
Analysts said anxiety over Iran's nuclear ambitions also supported crude futures. U.S. data showing gasoline demand on the rise at the start of the summer driving season and a refinery snag in Texas underpinned a rally in gasoline futures.
Light sweet crude for July delivery rose $1.99 to settle at $72.33 a barrel on the New York Mercantile Exchange, where gasoline futures gained more than 7 cents to close at $2.1975 a gallon.
Nationwide, the average retail price of gasoline is $2.85 a gallon.
Analysts downplayed Friday's rally, saying trading volume wasn't especially heavy.
"It was a typical pre-weekend rally in oil," said Mike Guido, director of commodity strategy in New York for bank Societe Generale.
The kidnapped workers, six British, one American and one Canadian, were aboard the drilling rig Bulford Dolphin when it was attacked during the night, Olsen Energy ASA, the rig's Norwegian owner, said in a news release.
The company said Nigerian and other authorities were working to resolve the situation, and drilling from the rig has been suspended.
Nigerian militants have blown up oil pipelines and kidnapped foreign oil workers to press their demands for local control of oil revenue by inhabitants of the oil-producing south, who feel cheated out of the wealth produced in their backyards.
The violence in Nigeria has led to the shut-in of more than 500,000 barrels per day, though new production in other areas has offset much of that loss, analysts say.
Still, the threat of output disruptions looms, and it is exacerbated by the fact that the world's oil producers have less than 2 million barrels per day of spare production capacity that could be called upon in an emergency. Global consumption is expected to average roughly 85 million barrels per day in 2006.
Iranian President Mahmoud Ahmadinejad vowed Friday that the West won't deprive Iran of its nuclear technology, sounding a defiant note after the world's major powers stepped up pressure on Tehran to accept a new package of incentives to halt its uranium enrichment program.
"There is no resolution over the issue and so the situation will continue to support high prices," said Victor Shum, energy analyst with Purvin & Gertz in Singapore.
The Organization of Petroleum Exporting Countries decided, as expected, on Thursday to leave its output quotas steady at 28 million barrels a day. Most cartel members are already producing all they can to take advantage of high prices, though oil ministers said they are watching the global economy closely for any signs of weakness, hinting that a pullback in production was possible later in the year.
While global oil demand is growing more slowly than usual, it is still strong. The Energy Department reported Thursday that U.S. gasoline demand over the past four weeks was up nearly 1 percent compared with the same time last year.
Valero Energy Corp. on Thursday said the dock at its Corpus Christi, Texas, refinery "sustained significant damage" after a wastewater storage tank was set ablaze by a lightning strike, forcing the company to reduce its output by 70,000 barrels per day.
In other Nymex trading, natural gas futures rose more than 17.5 cents to $6.623 per 1,000 cubic feet, while heating fuel futures climbed 4.38 cents to finish at $2.0145 a gallon.