Crude Oil Rebounds From Three-Week Low on Concern Over Supply Disruption
May 5 (Bloomberg) -- Crude oil rose from a three-week low in New York as the risk of a disruption to supplies from Iran, the world's fourth-largest producer, stemmed the biggest two-day decline in oil futures in almost a year.
Iran yesterday rejected U.S.-led demands the Islamic Republic halt uranium enrichment, saying it won't be intimidated. Countries seeking United Nations action against Iran are trying to ``create a crisis'' and raise tension in the Middle East, Iranian Ambassador Javad Zarif said.
``The market's reacting to the uncertainty'' over Iran's intentions, said Rowan Menzies, an analyst at Commodity Warrants Australia Pty in Sydney. ``There's support here at $70, which looks pretty positive for prices, I would say, at least in the very short term.''
Crude oil for June delivery rose as much as 62 cents, or 0.9 percent, to $70.56 in after-hours electronic trading on the New York Mercantile Exchange. It was at $70.44 at 9:20 a.m. in Sydney, 39 percent higher than a year ago.
The contract fell 6.3 percent the past two days, the biggest two-session decline since mid-May 2005, after a U.S. Energy Department report showed the nation's gasoline stockpiles rose for the first time in nine weeks, easing concern that refiners won't be able to meet summer fuel demand.
Oil futures, which reached $75.35 on April 21 and 24, the highest since trading began in 1983, fell 3.2 percent to $69.94 yesterday, the lowest close since April 13. It was the first dip below $70 a barrel since April 17.
Iran, Nigeria
Oil prices have gained 15 percent this year on the looming showdown between Iran and the UN, and after rebels attacks in Nigeria cut about a fifth of the nation's oil production. Royal Dutch Shell Plc, Europe's second-largest oil company, yesterday said about 455,000 barrels of daily oil output was halted at its Nigerian venture at the end of the first quarter.
``It doesn't look like there will be any positive change in those countries in the near term,'' Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said yesterday. ``I don't think we will see oil fall below $65 anytime soon.''
The U.S., U.K. and France are trying to get support for a resolution in the UN Security Council demanding Iran cease uranium enrichment. The U.S., which has rejected Iran's assurances the uranium is needed for power stations, not weapons, wants the resolution adopted May 8.
Resistance
China and Russia, both permanent members of the council with a veto, opposed the measure. Ambassador Nana Effah-Apenteng of Ghana said of the draft resolution goes ``further than we expected'', and Ambassador Oswaldo de Rivero of Peru said negotiations could take more than three weeks.
``I hope all parties will bear in mind that the only solution is going to be a negotiated one,'' UN Secretary-General Kofi Annan told reporters yesterday. ``And I would also urge the Iranians to back away a bit from their defiant posture.''
Gasoline for June delivery rose 1.54 cents, or 0.8 percent, to $2.0100 a gallon in after-hours trading, having plunged 8.3 percent the past two days. The contract fell 4.4 percent to $1.9946 yesterday, the first close below $2 since April 7.
U.S. gasoline inventories rose 1.1 percent to 202.7 million barrels last week, 4.8 percent less than a year earlier, the Energy Department said May 3. Refiners used 88.8 percent of their plant capacity, compared with 91.7 percent a year earlier.
``Gasoline inventories rose because there was a lift in imports and a flat demand number,'' Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis, said yesterday. ``There has yet to be a significant increase in refinery activity.''
Gasoline Demand
Daily consumption the past four weeks was little changed from a year earlier at 9.1 million barrels, the report showed.
The average U.S. pump price for regular gasoline rose to $2.918 a gallon yesterday, up 13 percent from a month ago, according to the Web site of AAA, the nation's largest motoring club. Prices exceed $3 a gallon in nine states and the District of Columbia.
Rising pump prices may be causing consumers to curtail their gasoline consumption, said Peyton Feltus, president of Dallas-based consultants Randolph Risk Management. If we ``continue to see demand just flat, it takes away a lot of the impetus for a rally,'' Feltus said.
To contact the reporter on this story:
Gavin Evans in Wellington at
[email protected]
Last Updated: May 4, 2006 19:23 EDT
