Oil crosses $75 on supply fears

LONDON: OIL rose more than $1 to above $75 on Thursday after Shell said it could give no timeline for restoring lost Nigerian output and a steep drop in US gasoline stocks pointed to vigorous demand in the world’s top consumer.

Israel’s bombardment of south Lebanon kept the market on edge that the 16-day-old conflict could hit exports from the Middle East, the region that pumps a third of the world’s oil. London Brent was up $1.07 at $75.07 a barrel, a rare premium to US oil because of the disruption to Nigerian exports. US crude rose 81 cents to $74.75.

Oil hit a record high of $78.40 on July 14. Shell, Nigeria’s biggest foreign operator, said it could not predict when it would restore 653,000 barrels per day of output lost from fields it oversees. Production in the world’s eighth biggest exporter has been reduced a quarter, mostly by militant attacks.

“We don’t think there will be significant production before the year-end,” Shell chief executive Jeroen van der Veer said on a conference call after the company’s second-quarter results. A leak in a pipeline carrying oil from Nigeria’s second biggest field, Bonny Light, forced Shell to declare force majeure on cargoes on Wednesday. An attack on an Agip flow station made a significant cut in the Italian firm’s output.

Prices also drew support from US government data showing a 3.2m barrel drop in gasoline inventories, far deeper than the 200,000-barrel draw expected by analysts.US gasoline demand, which accounts for more than 40% of global gasoline consumption, is up 1.8% from last year over the past four weeks, as $3 a gallon pump prices fail to deter summer holidaymakers from taking to the roads.

“There have been a lot of expectations that demand would be tapering off with high prices, but we really haven’t seen that coming through,” said Gerard Burg, minerals and energy economist at the National Australia Bank. US crude oil inventories were unchanged from the previous week, maintaining a healthy surplus versus a year ago, while distillate inventories rose 800,000 barrels, less than expected.

“The headline news is just how widespread — and serious — refiners’ problems were last week,” SGCIB said in a note. Israel dropped bombs and fired shells at south Lebanon on Thursday, a day after foreign ministers pledged in Rome to work urgently for a ‘lasting, permanent and sustainable’ ceasefire, disappointing Lebanon and others who want the war to stop now.

US Secretary of State Condoleezza Rice flew to Malaysia to meet Asian ministers. Iranian Foreign Minister Manouchehr Mottaki was also due in Malaysia for talks with his Malaysian counterpart on the crisis.“There’s a lot of geopolitical tensions in the world,” Shell CEO said. “Tension in the world usually means high oil prices.” Iran’s oil minister Kazem Vaziri-Hamaneh said he believed it was unlikely that scorching world oil prices would cool down.