Oil Rises Near $74 on Gasoline Demand, Nigeria Attack

Oil rose to near $74 a barrel on Wednesday as U.S. summer gasoline demand held strong against high prices and an attack on a Nigerian oil plant further cut supplies from Africa's largest producer.

U.S. crude settled up 19 cents at $73.94 a barrel while Brent crude rose 72 cents to $74.00 a barrel.

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Weekly data showed U.S. gasoline inventories fell last week by 3.2 million barrels, much more than the 200,000 barrels forecast by analysts in a Reuters poll, as strong demand and refinery problems sapped stockpiles.

The government report came against the backdrop of fighting in the Middle East that energy experts were concerned could spread to major oil producers in the region.

"The data compound the impact of bullish international news, including fierce fighting between Hizbollah militias and Israel in south Lebanon, renewed supply disruptions in Nigeria and extended refinery problems in Venezuela," Fimat analyst Antoine Halff said in a research note.

U.S. gasoline demand over the past four weeks averaged 1.8 percent more than the same time last year, as U.S. motorists took to the road for summer vacation undaunted by pump prices.

Motorists in the United States, which consumes about 40 percent of the world's gasoline, will continue to pay around $3 a gallon to fill their tanks this summer, the U.S. Energy Information Administration said on Wednesday.

"The data shows gasoline demand continuing to stay strong at 9.6 million barrels per day, even with pump prices near record highs," said Phil Flynn, an analyst at Alaron Trading in Chicago.

Outages in the past week at refineries feeding the United States, including the giant Amuay plant in Venezuela, have threatened gasoline supply, helping to push up fuel costs.

Fresh attacks on an oil facility disrupted production in OPEC-member Nigeria, where a militant campaign has cut output by more than a quarter this year.

Italian firm Agip said an overnight raid on a flow station in the Niger Delta had caused a "significant decrease" in output. Agip normally exports 200,000 barrels per day through its Brass tanker terminal in Bayelsa.

High quality Nigerian crude is prized by U.S. refiners looking to meet summer gasoline demand.

The Agip attack came two days after Nigeria's biggest foreign operator, Royal Dutch Shell, said a pipeline leak had disrupted 180,000 bpd of oil output. The cut took Shell's total supply loss in Nigeria to 653,000 bpd.


Foreign ministers from the United States, the Middle East and Europe agreed at a meeting in Rome on the need for an urgent cease-fire between Israel and Hizbollah guerrillas in Lebanon and for an international force under United Nations mandate to secure the border.

U.N. Secretary-General Kofi Annan said it was important to include both Iran and Syria to reach an agreement to end fighting, while U.S. Secretary of State Condoleezza Rice voiced "concern" about Iran's role in Lebanon.

Oil hit a record-high of $78.40 a barrel almost two weeks ago as fighting erupted, raising concerns the war could spread and endanger exports and shipping from the Middle East, which supplies almost a third of the world's oil.

But the price has since fallen around $4.

"We think for the moment that we've probably seen the worse we're going to see in terms of an oil price response to the conflict," said Katherine Spector, global head of energy strategy at JP Morgan.

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