NEW YORK — Oil prices briefly surpassed the $61 (U.S.) a barrel mark Thursday for the first time this year after the U.S. government reported surprisingly large drops in gasoline and heating oil inventories.
Tensions between Western powers and Iran also boosted prices; a UN watchdog group reported Thursday that the country still refuses to end its nuclear program.
“It's a great excuse to buy today,” said James Cordier, president of Liberty Trading Group in Tampa, Fla. The report was hardly a surprise, and Mr. Cordier pointed out that it doesn't really change the fundamental supply-and-demand picture. But against the backdrop of the inventory report, hedge fund money pouring into commodities, and the forthcoming driving season, traders saw it as an opportunity to buy.
Giving prices an additional lift, several stock markets around the world have been hitting all-time peaks. “Global expansion means global energy demand,” Mr. Cordier said. “We probably haven't seen the likes of what we're going to see in 2007.”
Light, sweet crude for April delivery rose 86 cents to $60.93 a barrel by midafternoon on the New York Mercantile Exchange, after spiking as high as $61.25 — the first time crude has traded above $61 since Dec. 29. Traders had pushed up prices more than 2 per cent a day earlier to settle above $60 a barrel for the first time this year.
U.S. crude inventories climbed by 3.7 million barrels to 327.6 million barrels in the week ending Feb. 16, the Energy Information Administration said Thursday. But gasoline inventories fell by 3.1 million barrels to 222.1 million barrels, and distillates, which include heating oil and diesel, fell by 5 million barrels to 128.3 million barrels. Analysts were expecting, on average, a modest rise in crude oil and gasoline inventories and a smaller drop in distillates.
Most of the distillate drop was caused by high demand for heating oil supplies, sparked by record-breaking chilly weather and snow storms in the Northeast and Midwest regions of the United States. Distillate fuel demand was nearly 10 per cent higher over the past four weeks than it was over the same period last year, the EIA said.
Supplies remain relatively ample — U.S. crude, gasoline and heating oil stockpiles remain at or above the average range for this time of year. But adding to supply worries was a report released Thursday by the International Atomic Energy Agency, the UN nuclear watchdog, which said Iran is still enriching uranium. The country's refusal to halt its nuclear program could trigger harsh UN sanctions.
The UN agency's conclusion was hardly a shock, but nevertheless kept the energy markets on edge about the possibility of supply disruptions; not only is Iran the second-largest exporter in the Organization for Economic Co-operation and Development, it is also located along the Strait of Hormuz, a channel that sees about 90 per cent of global oil exports flow through it, the U.S. Energy Department says.
“It's a little difficult to determine right now if we're on a path towards war or resolution at this point,” Fimat USA analyst John Kilduff said, noting that Iranian officials have “gone back and forth” on whether they would use oil supplies as a negotiating tool.
In other Nymex trading, gasoline futures advanced 4.58 cents to $1.7505 a gallon; heating oil futures rose 3.79 cents to $1.7195 a gallon; and natural gas futures rose 3.5 cents to $7.681 per 1,000 cubic feet.
The EIA also reported Thursday that U.S. storage of natural gas declined by 223 billion cubic feet to 1.865 trillion cubic feet, approximately what the market was expecting.
On the ICE Futures exchange in London, Brent crude rose $1.11 to $60.46.
