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Oil spikes by more than $3 amid supply concerns

 

AP

Oil spikes by more than $3 amid supply concerns

Tuesday June 10, 9:17 am ET 
By George Jahn, Associated Press Writer

 

Oil prices rebound on supply concerns, growing global demand and Middle East tensions

 

 

VIENNA, Austria (AP) — Oil prices rebounded Tuesday amid supply concerns, growing global demand and tensions in the Middle East.The Paris-based International Energy Agency lowered its forecast for global oil demand this year citing recent price surges, and predicted that oil product demand in 2008 would grow by 0.9 percent, or 800,000 barrels a day. That is down from the 1.2 percent, or 1 million barrels, the IEA forecast earlier, but investors had expected an even bigger cut, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

 

“I think the market was looking for a bigger amount of demand destruction in that report,” Flynn said. 

The IEA, in a monthly report, also had “disturbing” things to say about Chinese demand, Flynn said. The IEA, an energy advisor to Western industrialized nations, raised estimates for Chinese oil demand, citing reconstruction work in the aftermath of May’s earthquake. The IEA also suggested non-OPEC oil producing nations are having a tough time meeting demand.

Light, sweet crude for July delivery rose $3 to $137.35 a barrel by in electronic trading on the New York Mercantile Exchange.

Also supporting prices was a Tuesday attack on oil-industry security vessel, the second this week, in southern Nigeria. At least one person was killed. Nigeria is a major U.S. oil supplier. Militant attacks have cut into that nation’s oil output.

On Monday, crude futures pulled back from last week’s record highs, falling $4.19 to $134.35 a barrel on the New York Mercantile Exchange, after the dollar strengthened and Saudi Arabia voiced willingness to meet any increase in demand.

While prices were down or steady for much of the electronic trading day, analysts had forecast that the breather would be short-lived.

“The market is taking a breather after the very sharp gain last week but it’s undeniable we have a strong uptrend in the oil markets. The market is still prone to further price spike,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Shum said supplies could be hit if the current Atlantic hurricane season hurts production in the Gulf of Mexico. There are also still jitters over an Israeli cabinet minister’s warning of an attack on Iran if it didn’t halt its nuclear program, which sent oil prices sharply up Friday, he said.

That prospect appeared to dissipate over the weekend as Israeli officials distanced themselves from those comments.

Still, “given the sharp gains we have seen, a further spike to the $150 level is possible,” Shum said.

The jump began Thursday after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation. That sent the dollar falling against the euro. Some investors buy commodities such as oil as a hedge against a weakening dollar.

Crude futures surged 8 percent Friday, touching an all-time high of $139.12 a barrel in after-hours trading.

Prices retreated Monday after Treasury Secretary Henry Paulson said he would not rule out intervention to stabilize the U.S. currency. In London, the euro traded at $1.5506, down from $1.5652 late Monday in New York.

In other Nymex trading, heating oil futures jumped by more than 9 cents to $3.968 a gallon (3.8 liters.) Gasoline prices were up by close to 7 cents at $3.4605 a gallon while natural gas futures rose by nearly 12 cents to $12.72 per 1,000 cubic feet.

July Brent crude moved up $2.75 to $136.6763 cents on London’s ICE Futures Exchange.

Associated Press writer Eileen Ng contributed to this report from Kuala Lumpur, Malaysia.

 

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