Oil Closes Above $59 on Supply Worries

U.S. gasoline futures struck a seven-month high Monday amid worries over falling stockpiles and slow fuel production in the world's biggest energy consumer.

U.S. crude oil for May delivery, the most actively traded contract, settled up 12 cents to $59.70 a barrel, though the expiring April contract was down 52 cents to $56.59. London Brent for May delivery was up 22 cents to $60.52.

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The rally pushed benchmark crude oil prices moderately higher as dealers shifted their focus from the waning winter heating season to looming peak summer driving demand, which traditionally kicks in at the end of May.

U.S. gasoline futures on the New York Mercantile Exchange gained 5.10 cents, or 2.7 percent, to $1.9581 a gallon after rising as high as $1.9740, the highest level since August 2006.

"The best support is in gasoline, because that is the most critical seasonal focus," said Tim Evans, analyst at Citigroup Global Markets.

The rise followed a drop in prices last week after troubles in the U.S. housing sector sparked concern about economic growth. U.S. crude fell as low as $56.17 Friday, the lowest level since the end of January.

U.S. gasoline inventories have fallen about 6 percent since early February, and are expected to fall further, as maintenance and mechanical troubles cut refinery production levels by nearly 15 percent.

A survey of analysts Monday showed expectations that the next government report on U.S. petroleum supplies would show gasoline stocks down another 1.8 million barrels, alongside a 1.2 million barrel increase in crude supply.

Helping the gasoline rally was news that BP Plc shut a unit at its 260,000 barrels per day Los Angeles-area refinery in Carson, California, Friday.

Oil shrugged off China's move at the weekend to raise interest rates, which earlier Monday led to price falls in some commodities, such as copper. China is the world's second-largest oil consumer.

"This is a pretty clear signal that Chinese authorities think that growth is a bit too fast," said Tony Dolphin, director of economics and strategy at Henderson Global Investors. "The flip side of that is this is a pretty minor tightening of policy."

The Organization of the Petroleum Exporting Countries, which agreed last week to keep supply curbs of 1.7 million bpd in place, is keeping a close watch on the global economy.

Should prices fall sharply, the group that pumps more than a third of the world's oil would hold a special meeting. The next scheduled OPEC gathering is in September.

"If oil prices in international markets go down, certainly OPEC will make new decisions by holding an emergency meeting," Iranian Oil Minister Kazem Vaziri-Hamaneh said on Saturday. He did not give a specific price level.

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