WASHINGTON – Oil prices rose by more than $1 a barrel Friday, reversing a three-day decline. Brokers attributed the rise to tough talk from an Iranian cleric and the kidnapping of a senior Iraqi petroleum industry official — proof that the killing of Al Qaeda's leader in Iraq did not mark the end of instability in that country.
Also, a Nigerian government official said more than 800,000 barrels a day of the country's oil production was shut — about 60 percent more than previously reported — because of violence in the Niger Delta, Dow Jones Newswires reported.
Meantime, Valero Energy Corp. experienced a "total power failure" at its 240,000-barrel-per-day Aruba refinery Wednesday night, a spokeswoman said Friday, adding that it would be at least two weeks before the plant would be operating at "reduced rates."
Fimat USA oil broker Mike Fitzpatrick said the oil market is staring at a "wall of worry" that includes strong global demand, geopolitical unrest and the Atlantic hurricane season.
Light sweet crude for July delivery climbed $1.28 to $71.63 a barrel on the New York Mercantile Exchange. In London, Brent crude gained $1.43 to settle at $70.48 on the ICE Futures exchange.
Nymex gasoline futures settled 5.06 cents higher at $2.1528 a gallon, while heating oil prices rose almost 3 cents to $2.0130 a gallon. Natural gas prices increased by 10 cents to $6.294 per 1,000 cubic feet.
The cost of crude is roughly 30 percent more than a year ago, and U.S. pump prices average $2.90 a gallon. Gasoline demand keeps rising, albeit at a slower pace than normal, according to government statistics.
Oil prices jumped Friday amid news that gunmen kidnapped Muthanna al-Badri, a senior Iraqi oil official in Baghdad, as he was returning home from work.
Analysts had cautioned Thursday against reading too much into the U.S. airstrike that killed Abu Musab al-Zarqawi, a Jordanian-born militant who led a campaign of suicide bombings and other violence across Iraq. Attacks on the country's oil infrastructure, including pipelines, were not directly linked to his movement.
"We're not out of the woods in regard to the insurgency in Iraq, and the market needs a couple of weeks, maybe a month, to gauge the situation before prices will ease," said Mark Pervan, commodities analyst at Daiwa Securities in Melbourne, Australia.
Vienna's PVM Oil Associates said that — despite al-Zarqawi's death, "the general level of political instability and violence as well as the absence of a new legal framework" will continue to keep oil-related investments — and crude exports — down in Iraq.
Additionally, the outlook regarding Iran's nuclear program, which the West wants shut down, remains cloudy. A top hard-line Iranian cleric on Friday came out against a Western incentive package aimed at persuading Iran to suspend uranium enrichment, reflecting conservative pressure on the government to reject the offer. Earlier in the week, Iran's president suggested an openness to negotiate.
With the summer's Atlantic hurricane season just under way, traders are also worried about the potential for powerful storms to damage important oil production and refining facilities across the Gulf Coast.
In other Nymex trading, heating oil futures finished 6.03 cents higher at $2.0459 a gallon.