Crude oil Near Highest price

Crude oil traded near its highest price in New York this year as diplomats worked to free British navy personnel held in Iran and on signs U.S. gasoline supplies fell for a seventh straight week.

Iran, already under United Nations pressure to stop its nuclear research, will hold the 15 sailors and marines to account for violating its territorial waters, the Islamic republic's deputy foreign minister said on state-run television yesterday. A U.S. government report tomorrow may show gasoline stockpiles dropped 2.25 million barrels, or 1.1 percent, last week.

The Iran situation ``represents a potential source of escalation'' in the dispute with the West, said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. Demand is strong and ``gasoline is probably going to lead everything higher,'' he said.

Crude oil for May delivery was trading at $62.63 a barrel, down 28 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8:58 a.m. in Singapore.

The contract rose 63 cents, or 1 percent, to close at $62.91 a barrel yesterday, its fourth straight gain. Futures touched $63.30, the highest intraday price for a front-month contract since Dec. 20.

Iran has the second-biggest proved oil reserves in the world and is the second-biggest producer in the Organization of Petroleum Exporting Countries. Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.

Iran Interrogates

The U.K. government yesterday again summoned Iranian Ambassador Rasoul Movahedian over the continued detention of 15 British sailors and marines, Agence France-Presse reported.

The British personnel were seized on March 23 while inspecting vessels in the Persian Gulf. They are being interrogated to determine whether their entry into Iranian waters was deliberate or a mistake, Iranian state television said on its Web site yesterday, quoting Deputy Foreign Minister Mehdi Mostafavi.

The U.K. government is ``utterly confident'' the boarding party was in Iraqi waters when they were seized, a spokesman for Prime Minister Tony Blair said yesterday.

``The market is obviously concerned about what is happening with Iran,'' Phil Flynn, a commodities trader for Chicago-based Alaron Trading, said yesterday. ``Even without the growing tensions with Iran prices would be up because the fundamentals are strong.''

Gasoline supplies in the U.S., the world's largest oil consumer, fell 7.3 percent to 210.5 million barrels in the six weeks ended March 16, leaving them 5 percent lower than a year earlier, according to the Energy Department.

Gasoline Demand

Demand, which peaks between the Memorial Day holiday in late May and Labor Day in early September, was 2.1 percent higher than a year earlier in the four weeks ended March 16, the department said last week.

Fuel demand will push oil higher in coming weeks unless there is a significant increase in U.S. stockpiles, Altavest's Hartmann said. Doubts about the strength of the U.S. economy may not be enough to slow oil's climb toward $67 a barrel.

``It's hard to know whether or not these high prices have done that much damage to the economy,'' he said. ``We're really seeing that gasoline is an inelastic commodity'' for most Americans.

The Dow Jones Industrial Average dropped for the first time in six days yesterday after a Commerce Department report showed U.S. new home sales unexpectedly fell to the lowest level in almost seven years last month.

Gasoline, Refining

Gasoline for April delivery was at $2.0617 a gallon after rising 3.5 percent to $2.0677 yesterday, the highest close since Aug. 15 and the biggest one-day gain since Feb. 13. The more actively traded May contract was at $2.01 after rising 3.4 percent to $2.0152 yesterday.

The jump in the premium for the April contract may reflect high prices in the physical gasoline market, Hartmann said.

Prices have surged the past two months as demand rose and fires and break-downs slowed refiners' efforts to make fuel for the summer.

The California Energy Commission asked Valero Energy Corp. to delay maintenance at its Wilmington refinery after processing rates in the state fell to the lowest since 1999, Commission spokeswoman Claudia Chandler said yesterday.

The average U.S. pump price of regular gasoline rose 3.3 cents to $2.61 a gallon in the week that ended yesterday, the highest since Sept. 11, according to a U.S. Energy Department report yesterday.

U.S. crude oil stockpiles probably gained 2.3 million barrels last week, based on the median estimate from a Bloomberg News survey of 11 analysts. Inventories held 329.3 million barrels on March 16, 3.7 percent less than a year earlier, and 6.2 percent higher than the five-year average for the period.

source:www.bloomberg.com