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Oil jumps nearly $3 on Europe refinery trouble

Posted : Mon, 07 Apr 2008 18:16:06 GMT
By : Reuters
Category : US (Business)
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NEW YORK (Reuters) - Oil rose nearly $3 on Monday to past $109 a barrel as a fire at a European refinery stirred fresh fuel supply concerns.

Finnish refiner Neste Oil said repairs and maintenance on a diesel unit at its 200,000-barrel-per-day (bpd) Porvoo refinery would stretch through May following a fire on Friday.

The news pushed prices for London gas oil, a fuel closely related to diesel and heating oil, to a record $1,005 a tonne and led U.S. heating oil and crude prices sharply higher on the New York Mercantile Exchange, dealers said.

"It's the gas oil situation in Europe that's pushing up NYMEX heating oil," said Tom Knight, a trader at Truman Arnold. "Distillate prices there have shot up amid refinery maintenance and a fire at Neste's Porvoo refinery in Finland."

U.S. crude jumped $2.89 to $109.12 a barrel by 1747 GMT after touching $109.48 earlier in the day. London Brent crude gained $2.27 to $107.17 a barrel.

Diesel is widely used in Europe as a motor fuel, and global demand for diesel is rising significantly more quickly than that for gasoline, analysts have said.

U.S. Energy Secretary Sam Bodman said he hoped oil cartel OPEC would ramp up production to help motorists as the world's top consumer nears the summer driving seasons with prices near the all time high of $111.80 a barrel hit on March 17.

"I have repeatedly asked that there be an increase," Bodman said. "They have so far chosen not to do it. I remain optimistic."

OPEC Secretary General Abdullah al-Badri insisted the market was well-supplied and that the producer group was not under pressure to raise output.

"Oil supply to the market is enough and high oil prices are not due to a shortage of crude but rather it is because of the decrease in the dollar's value, shortage of refinery capacity and some political tensions in the world," al-Badri was quoted as saying by Iran's official IRNA news agency.

Bodman warned U.S. consumers, already showing signs of curbing driving habits amid high energy costs and the wider economic crisis, could face $3.50 a gallon gasoline at the pump this summer.

Giant oil consumer China agreed to grant a hefty tax rebate on crude imports to help its oil firms limit heavy refining losses, while avoiding fuel price increases that would stoke inflation, a government source said on Monday.

The G7 group of industrialized nations meets in Washington on Friday under pressure to come up with some solutions to months of financial market turmoil that have raised the specter of a worldwide economic downturn.

Ships along the northern end of the Houston Ship Channel, which feeds eight refineries in Houston and Texas City, were stopped by dense fog on Monday morning, adding further support to prices.

A Reuters poll of analysts ahead of weekly U.S. inventory data due out on Wednesday forecast crude stocks rose 2.2 million barrels in the week to April 4. Distillate stocks were forecast to show a 1.4 million barrel draw, with gasoline down 2.6 million barrels.

(Reporting by Matthew Robinson, Gene Ramos and Robert Gibbons in New York, Jonathan Leff in Singapore and Bate Felix and Maryelle Demongeot in London)


(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

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