WASHINGTON – Oil prices jumped to $75 a barrel Wednesday on concerns about instability in the Middle East.
World powers sent Iran back to the United Nations' Security Council for possible punishment over its nuclear program, stirring concerns about how OPEC's No. 2 supplier might respond.
Adding to worries about unrest in the region, Israel's military pushed into Lebanon after Hezbollah militants crossed the border to capture two Israeli soldiers. The military action in Lebanon is a second front in the fight against militants by Israel, which already is waging an operation to free a captured soldier in the Gaza Strip.
"There's turmoil in the Middle East, which is all you need" for prices to move higher, said BNP Paribas Commodity Futures broker Thomas Bentz. "The path of least resistance is still up."
Prices were steady earlier in the day as traders shrugged off a U.S. government report that showed a sharp decline last week in domestic crude-oil inventories.
Rising gasoline demand despite prices of almost $3 per gallon at the pump has also put upward pressure on oil prices.
Also on Wednesday, the International Energy Agency nudged its forecast for world oil demand growth for this year to its lowest level yet, while forecasting a rebound in demand growth next year. The Paris-based energy watchdog also predicted that the world's oil supply cushion would grow to more comfortable levels over the next five years.
Light sweet crude for August jumped 79 cents to settle at $74.95 per barrel on the New York Mercantile Exchange, where gasoline futures advanced more than 6 cents to settle at $2.2559 a gallon.
Oil futures settled at a record $75.19 a barrel on July 5 in New York and touched an intraday record of $75.78 two days later.
In its weekly petroleum report, the Energy Department said commercially available crude-oil inventories shrank by 6 million barrels to 335.3 million barrels. Crude supplies are still 2 percent higher than last year.
Brokers chalked up the 6 million barrel draw in crude, which was about four times larger than they were expecting, to shipping snags along the Gulf Coast in the aftermath of an oil spill.
"A lot of people think you're going to get some of this back next week," said Mike Guido, Societe Generale's director of commodity strategy.
Gasoline inventories declined by 400,000 barrels last week to 212.7 million barrels, or 0.8 percent below year ago levels. The supply of distillate fuel, which includes heating oil and diesel, rose by 2.6 million barrels last week to 129.9 million barrels, or 7 percent above last year.
Demand for gasoline over the past four weeks averaged 9.6 million barrels a day, or 1.7 percent higher than the same period a year ago.
In its monthly report, the IEA trimmed its global oil-demand growth forecast for this year to 1.21 million barrels a day, but in its first outlook for 2007 it estimated demand would grow by 1.57 million barrels a day to a total of 86.37 million barrels a day.
The energy watchdog also said world oil demand is expected to increase by 2 percent per year in the next five years. Supplies are also expected to increase, but the IEA saw little prospect for significant price cuts.
"Without seeking to anticipate the geopolitical context, this (projected) level of spare capacity may not have a significant impact on prices," the IEA said.
In other Nymex trading, heating oil futures gained less than a penny to $2.0184 per gallon and natural gas futures rose 14.9 cents to $5.782 per 1,000 cubic feet.