Sioux City Journal: Oil prices rise on high demand, potential cuts

EXTRACT: On Wednesday, Nigeria’s two main oil-workers’ unions met to decide whether to strike in protest of a member’s death. Nelson Ujeya, employed by Royal Dutch Shell, died Aug. 20 after weeks in captivity when the military fired on a boat carrying him to freedom after local leaders negotiated his release. In all, 12 people died in the incident.

THE ARTICLE

NEW YORK (AP) — Oil prices rose above $70 a barrel Wednesday, as persistently high fuel demand and concerns about possible supply disruptions in the Middle East and Nigeria offset news of increasing U.S. oil inventories.

The higher finish came after prices had traded lower for most of the day.

Thursday marks the United Nations’ deadline for Iran, OPEC’s No. 4 oil producer, to halt its nuclear program. If they don’t comply, any U.N. sanctions could provoke the country to retaliate by blocking exports.

Meanwhile, a possible strike by oil workers looms in Nigeria, the fifth-largest supplier of oil to the United States.

Light sweet crude for October delivery rose 32 cents to settle at $70.03 a barrel on the New York Mercantile Exchange after trading as low as $68.65 earlier in the day — almost $10 below the record high of $78.40 a barrel reached July 14.

Wednesday’s rise in crude futures ended two days of sharp drops that brought them roughly 10 percent below their level of three weeks ago.

Prices continued the decline early Wednesday. Analysts had expected U.S. oil inventories to decrease in the past week.

But prices bounced back in later trading.

“Unless there’s a major sea change in market, or unless you believe economy is going to collapse, you’ve got to believe the correction is over,” said Alaron Trading Corp. analyst Phil Flynn.

Gasoline futures rose 1.58 cent to $1.805 a gallon, and heating oil futures rose 0.64 cent to $1.9496 a gallon.

Brent crude on London’s ICE futures exchange rose 32 cents to settle at $70.18 a barrel.

U.S. crude inventories rose 2.4 million barrels to 332.8 million barrels in the week ended Aug. 25, or 6.2 percent above year-ago levels, the EIA said Wednesday. Gasoline inventories rose 400,000 barrels to 206.2 million barrels, or 4.6 percent above last year’s levels.

Distillate fuels rose 1.3 million barrels to 136.8 million barrels, with just 300,000 barrels of the rise attributable to heating oil. Distillate inventories are slightly below where they were last year.

The main reason crude inventories rose so much last week was because of surging imports, not increased domestic production.

“The question is, is that going to continue? More than likely, it’ll be a short-term phenomenon,” Flynn said, noting that those levels of imports are hard to keep up.

Furthermore, U.S. demand for gasoline, diesel and heating oil is still going strong, as is jet fuel demand — up 2.8 percent over the last four weeks from last year, despite a thwarted terror attempt at a London airport that some traders thought might deter travelers.

“With strong global demand for distillate fuel (diesel fuel and heating oil combined), given that diesel fuel markets in Asia and Europe are particularly robust, heating oil prices may rise to attract sufficient imports this winter to balance demand,” the EIA said in its weekly commentary.

Refineries operated at 92.9 percent capacity last week, the EIA said.

Oil prices had fallen earlier this week on relief that a weaker tropical storm Ernesto, which landed in Florida late Tuesday, appeared to be of little threat to Gulf of Mexico oil facilities.

Traders remain concerned, though, that Iran, the world’s fourth-biggest oil producer, could block oil exports if the U.N. imposes sanctions over its nuclear program.

Tehran faces a Thursday deadline to halt enrichment of uranium, which can be used in the production of nuclear weapons. U.N. and European officials said Wednesday that Iran has persisted in enrichment until at least Tuesday, despite the looming deadline and threat of U.N. sanctions.

On Wednesday, Nigeria’s two main oil-workers’ unions met to decide whether to strike in protest of a member’s death. Nelson Ujeya, employed by Royal Dutch Shell, died Aug. 20 after weeks in captivity when the military fired on a boat carrying him to freedom after local leaders negotiated his release. In all, 12 people died in the incident.

Nigeria is Africa’s largest crude producer and the fifth-largest supplier of oil to the United States. Militant attacks and kidnappings in the southern Niger Delta region have cut production by a quarter this year so far.

In other Nymex trading, natural gas futures fell 59.1 cents to $6.28 per 1,000 cubic feet.

Retail gasoline prices have fallen over the past couple weeks. The average U.S. price for a gallon of unleaded regular gasoline cost $2.823 on Wednesday, according to AAA, more than 5 percent lower than a month ago.

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