Oil prices spike past US$70 on release of inventory data

22-Jun-06

Crude oil prices rose above US$70 a barrel after the U.S. government report suggested that fuel demand isn't being hampered by high prices as last week gasoline inventories grew at a slow pace despite high production levels. Light sweet crude for August delivery rose to US$70.33 a barrel Wednesday on the New York Mercantile Exchange and August Brent crude on the ICE's futures exchange rose $to US$69.17 a barrel. The build in U.S. gasoline inventories was 300,000 barrels, while gasoline production surged to 9.35 million bpd, up 1.5% from a week earlier and more than 4% higher than a year ago. Gasoline inventories are now at 213.4 million barrels, about 1% below year-ago levels. Refinery utilization is at around 93%, lower than it normally is this time of year, as Gulf coast refineries are still recovering from damage from last year's hurricanes. Caught amidst several supply disruptions, energy markets have witnessed a yo-yoing of sentiments in recent weeks. Earlier this week, oil prices declined amid conciliatory remarks by Iran that the Western package of incentives meant to persuade it to give up its uranium enrichment program was "a step forward." However, on Wednesday, Tehran decided it would respond in mid-August. The US President has termed this time period as "a long time for a reasonable answer." On Monday, Bush had threatened Iran that a rejection of the incentives will result in political and economic sanctions. Saudi Arabia's ambassador to the United States is quoted to have said that world oil prices could triple if the diplomatic standoff over Iran's nuclear program escalates into a military conflict. An oil industry labor dispute is underway in Norway, where key oil service workers went on strike after state-led mediation failed to settle a new contract. Their employers threatened to retaliate by locking out roughly 2,500 more oil service workers. In Nigeria, unidentified gunmen kidnapped two Filipino oil-industry employees of Petroleum Geo-Services, an Oslo, Norway-based oil-field services company. Daily output of about 2.5 million bpd has been cut by some 20% in Nigeria, Africa's biggest oil exporter and the United States' fifth-largest supplier.