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MoneyCNN.com: Oil rises on refinery outages

Problems reported at two Texas plants as gasoline supplies remain low; prices rebound despite strike resolution in Nigeria.

June 25 2007: 4:20 PM EDT

NEW YORK (Reuters) — Oil rose Monday as a string of U.S. refining outages again sparked concerns of a supply shortfall in the midst of the top consumer’s peak driving season.

Prices had fallen more than a dollar in earlier activity as Nigerian oil export fears eased after a production-threatening strike ended and Royal Dutch Shell (Charts) said it was preparing to restart shipments from a shuttered field.

U.S. crude for August delivery rose 4 cents to settle at $69.18 a barrel on the New York Mercantile Exchange.

Support came from news of maintenance at Total’s (Charts) Port Arthur, Texas, refinery and problems at Exxon Mobil’s (Charts, Fortune 500) plant in Baytown, Texas, adding to concerns that lagging U.S. refinery output cannot keep up with demand.

The outages helped retrace losses earlier in the trading session after Royal Dutch Shell said it was preparing to resume exports from a Nigerian oilfield abandoned over a year ago because of militant attacks.

The news came two days after Nigerian unions ended a strike that had threatened to halt shipments from Africa’s biggest oil producer. It could mark an easing of tension in the oil-rich delta where violence has shut a quarter of Nigeria’s output.

Oil had touched a 10-month high early last week on concern the Nigerian strike might disrupt oil exports.

Nigeria’s biggest foreign operator Royal Dutch Shell said its Forcados oil export terminal may resume operations in July. A restart would add to supply of Nigerian crude, prized by refiners as it is easy to process into fuels.

“This is good news and it has taken some of the concern away from the market,” said Chip Hodge, energy portfolio manager with John Hancock Financial Services in Boston.

“There is not a lot of excess production capacity and the potential loss of Nigerian supplies had put upward pressure on prices, especially given the high quality of Nigerian crude.”

Product concerns

Below-normal stocks of gasoline and heating oil in top consumer the United States continued to underpin the market, however. U.S. crude stocks are at a nine-year high but refiners have been struggling to churn out refined oil products.

“[We] believe that the continued stress on the U.S. refining system from the adjustment to more stringent product specifications could lead to further refinery outages, posing a downward risk to U.S. refinery runs,” said Goldman Sachs.

Signs OPEC output is creeping higher to take advantage of high prices also helped tip the market lower early.

The 10 OPEC members subject to oil production limits are expected to pump 26.8 million barrels per day in June, up from 26.7 million bpd the previous month, said Conrad Gerber, head of Petrologistics, which tracks tanker shipments.

 

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