WASHINGTON – Oil prices jumped to $75 a barrel on Monday following reports of several refinery snags that helped push gasoline futures higher.
Earlier in the day, prices had fallen on traders' growing belief that the violence in Lebanon and Israel is unlikely to spread across the oil-producing region. But reports of refinery snags from Texas to California reignited concerns about fuel supplies during the busy summer driving season.
James Cordier, president of Liberty Trading in Tampa, Fla., downplayed the minor refinery troubles, explaining that oil futures simply are trading in a new range between $73 and $78. However, he said it will take a significant supply disruption to push them higher from there.
"If we can get through this summer and into fall without hurricane-related production disruptions in the Gulf of Mexico, and geopolitical concerns don't worsen, crude oil in the September-October timeframe could be in the sixties," Cordier said.
In afternoon trading, light sweet crude for September delivery advanced 62 cents to settle at $75.05 a barrel on the New York Mercantile Exchange, where gasoline futures rose by 2.48 cents to settle at $2.3142 a gallon.
While the fighting between Israel and militants in Lebanon hasn't spread — a key reason why oil has declined from highs above $78 — the potential remains and that is weighing on the minds of traders, analysts said.
"Oil continues to flow and that's all the market's caring about for now," said Alaron Trading Corp. analyst Phil Flynn.
Israeli ground forces pushed deeper into Lebanon on Monday in heavy fighting and captured two Hezbollah guerrillas, while two aid convoys carrying food, generators and other badly needed supplies left Beirut for two southern cities.
Secretary of State Condoleezza Rice made a surprise visit to Beirut to launch diplomatic efforts aimed at ending 13 days of warfare.
Prices will be dependent upon the progress of these talks, said Paul Harris, head of energy and emissions at Bank of Ireland Global Markets in Dublin.
The eruption of fighting between Israel and Hezbollah militants in Lebanon on July 12 lifted crude futures to a record $78.40 two days later on fears that the violence would escalate into a regional war and disrupt supplies, particularly from Iran, OPEC's No. 2 supplier and a backer of Hezbollah. The violence has killed hundreds in Lebanon and dozens in Israel.
In other Nymex trading, natural gas futures rose by 46.6 cents to settle at $6.605 per 1,000 cubic feet and heating oil futures gained 1.19 cent to settle at $1.9699 a gallon.
Valero Energy Corp. (VLO) said output at its Memphis, Tenn., refinery would be reduced by 25,000 barrels per day as it makes some repairs anticipated to take nine days.
Dow Jones Newswires reported that two Louisiana refineries experienced brief power outages but that production was unaffected. The cause was believed to be a lightning strike. A similar incident occurred at a Texas refinery, but it was not immediately known if output was affected.
Last week, Valero shut down its St. Charles, La. refinery for 20 days for repairs. The company anticipates a total loss of 1.3 million barrels of gasoline production over the repair period.