Oil Rises as Militants Attack Nigeria PipelinOil Rises as Militants Attack Nigeria Pipeline; U.S. Report Due
By Tom Cahill
May 30 (Bloomberg) -- Crude oil rose in New York before a report that may show U.S. refinery production will pick up too late to satisfy peak demand. An attack on a Nigerian pipeline helped push prices higher.
A U.S. government report tomorrow will probably show the nation's below-average gasoline stockpiles gained 1.4 million barrels, or 0.7 percent, last week, according to a Bloomberg News survey of 12 analysts.
``Driving season has already kicked off, and stocks should have been built already,'' said Michael Davies, an analyst at commodities broker Sucden (U.K.) Ltd. in London.
Royal Dutch Shell Plc, Europe's largest oil company by market value, said it had begun restoring 150,000 barrels of lost output after an attack on a pipeline yesterday.
``There's been this Shell Nigerian announcement -- people are talking about it,'' said Jon House, an oil trader with Macquarie Bank Ltd. in London.
Crude oil for July delivery was at $63.55 a barrel, up 40 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:25 a.m. in London.
The contract settled at $63.15 a barrel yesterday, down $2.05, or 3 percent, from the end of last week. The exchange was closed for floor trading during the Memorial Day holiday on May 28. Trading the past two days was combined into a single session for settlement purposes.
Brent crude oil for July settlement was at $68.39 a barrel, up 29 cents, today on the London-based ICE Futures exchange, after falling 2.3 percent yesterday.
``After a big move like yesterday there's always a bit of consumer business'' propping up prices, House said.
Nigerian Attack
Shell spokeswoman Precious Okolobo said villagers yesterday raided the Bomu Manifold, a gathering point for crude flowing to the Bonny export terminal. Production was halted briefly. A raid on the facility earlier this month halted 170,000 barrels a day and led Shell to delay exports for May and June.
Raids by militants in Nigeria have forced Shell and Eni SpA to halt output totaling more than 600,000 barrels a day, more than a quarter of the country's production.
Gasoline stockpiles in the U.S., the world's biggest oil consumer, held 196.7 million barrels on May 18, or 7 percent less than the five-year average for the period, the U.S. Energy Department said last week.
Demand peaks from June through August in the U.S. as summer vacations put more cars on the road. The season begins with the three-day Memorial Day weekend.
Refinery Operation
Tomorrow's Energy Department report will probably show U.S. refiners used 91.6 percent of their plant capacity last week, according to the analyst surveyed by Bloomberg News, the highest rate since Sept. 22. Daily gasoline production rose by 667,000 barrels the preceding four weeks.
The weekly report was delayed by a day because of the Memorial Day holiday.
``There was a lot of hype going into the weekend,'' said Mark Waggoner, the president of Excel Futures Inc. in Huntington Beach, California, who was buying gasoline yesterday. ``We will see a build, but we will probably see demand up as well. In the weeks to come we're going to see a big pick up in demand.''
Gasoline for June delivery was at $2.3045 a gallon today after tumbling to $2.2979 yesterday, a 4.4 percent drop from the end of last week. The more actively traded July contract was at $2.2076, after falling to $2.1934 yesterday, down 5.1 percent from May 25.
``It's very dangerous to say gasoline is over,'' said House. ``It's too soon to say that yet, we've got hurricane season ahead of us and plenty of short term concerns.''
Fuel Demand
Demand, based on deliveries from refineries, averaged 9.36 million barrels a day in the four weeks ended May 18, or 1.2 percent more than a year earlier, the Energy Department said last week. Production rose to 9.2 million barrels a day that week, the highest this year.
Valero Energy Corp., the largest U.S. refiner, began the process of restarting the fluid catalytic cracking unit at its McKee refinery near Sunray, Texas, according to a filing with the Texas Commission on Environmental Quality. The catalytic cracker was shut May 24 for maintenance.
U.S. oil stockpiles held 344.2 million barrels on May 18, 7.6 percent more than the five-year average for the period. The 1 million barrel-increase analysts are forecasting will take inventories to their highest since June 23.
Rising U.S. stockpiles have tempered gains in New York oil futures the past three weeks when renewed violence in Nigeria pushed Brent prices to a nine-month high.