Oil climbs on Mid-East tension, US inventory falls

Oil climbs on Mid-East tension, US inventory falls

Felicia Loo / Reuters

Singapore: Oil prices climbed further above $76 a barrel on Friday, 7 September, just about $2 below record highs, as tension between Syria and Israel compounded supply worries after falls in US crude and gasoline inventories.

US crude gained 18 cents to $76.48 a barrel by 0313 GMT, having gained 57 cents on Thursday. London Brent crude edged up 3 cents to $74.80.

Crude inventories in top consumer the US fell by a higher-than-expected 3.9 million barrels last week, as refiners boosted runs, government data showed on Thursday. Gasoline stocks sank 1.5 million barrels to the lowest level in two years, following a series of outages in the ageing US refining system.

“It is still a bull trend with major concerns about US oil stock levels, though there are concerns over the US economy slowing. There may be profit-taking when prices hit $78 a barrel," said Gerard Rigby from Fuel First Consulting in Sydney. Adding to supply worries was tension in the Middle East, the source of nearly a third of world oil, after Syria accused Israel of bombing its territory on Thursday and warned it could respond.

Further support came from the US embassy in Nigeria warning US and other Western interests in Africa’s top oil producer are at risk of “terrorist attack". US prices have climbed 3.3% this week to near the record high of $78.77 hit on 1 August.

The near-record prices are sending a message to the Organization of the Petroleum Exporting Countries (Opec) that the world market is very tight, the new head of the International Energy Agency told Reuters on Thursday.

But Opec is expected to leave output curbs in place at its meeting next Tuesday in Vienna, after several members of the group have said they see no need to boost supply.

Some analysts see stronger demand in the fourth quarter, causing a supply crunch unless Opec raises output.

An Opec source told Reuters the group may have to raise output by up to 1 million barrels per day (bpd) later this year. Opec production in August was just over 30 million bpd, a Reuters survey found.

Traders are also keeping an eye on the storm season in the Gulf of Mexico, with the Colorado State University forecasting more storms ahead.