Oil Jumps Above $70 in N.Y.

Crude oil jumped above $70 a barrel to a nine-month high in New York on signs U.S. supplies will slip as refineries increase output of gasoline and other fuels.

Refineries operated at 89.4 percent of capacity last week, a 1.8 percentage point gain from the week before, an Energy Department report yesterday showed. West Texas Intermediate crude oil, or WTI, the grade traded in New York, was at the lowest discount to Brent oil in more than three months today.

``On the crude side the perception is that with refineries coming back we will start seeing supplies fall,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``A lot of the strength you are seeing in WTI today may be due to traders moving away from Brent.''

Crude oil for August delivery rose 85 cents, or 1.2 percent, to $69.82 a barrel at 9:53 a.m. on the New York Mercantile Exchange. Futures touched $70.09, the highest since Sept. 1. Prices are down 3.3 percent from a year ago.

Brent crude oil for August settlement rose 9 cents to $70.62 a barrel on the London-based ICE Futures exchange.

Brent has been higher than WTI this year as crude-oil supplies in Cushing, Oklahoma, the delivery point for New York futures, rose. Brent, which is produced in the North Sea, has also been pushed higher by threats to supply from Iran and Nigeria. Most Middle East, African and European grades are priced in relation to Brent.

``The WTI discount has come down from more than $6.50 a month ago,'' Barakat said. ` A lot of geopolitical worry about Iran and Nigeria that contributed to the run-up of Brent is being taken out of the market.''

Three-Month Low

WTI traded at a 79 cent a barrel discount to Brent today, the lowest since March 23. WTI traded at a record $6.54 a barrel discount on May 24, based on closing futures prices.

``Product supplies in yesterday's report fell more than anyone expected,'' said Tom Bentz, an oil broker with BNP Paribas Inc. in New York. ``From a technical standpoint it looks like we will test the recent highs again.''

U.S. gasoline stockpiles fell 749,000 barrels last week, the first drop in eight weeks, yesterday's report showed. An increase of 1.04 million barrels was expected, according to a Bloomberg News survey. Inventories of distillate fuel, a category that includes heating oil and diesel, plunged 2.28 million barrels. A 550,000 barrel gain was expected.

Gasoline for July delivery in New York increased 1.2 cents, or 0.5 percent, to $2.2666 a gallon.

Tahiti Project

Chevron Corp., the second-largest U.S. energy company, said its $3.5 billion Tahiti oil development in the Gulf of Mexico will be delayed because it discovered shackles used to connect mooring lines were faulty. New shackles are being ordered to ensure the Tahiti platform is safe and reliable, San Ramon-based Chevron said today in a statement on PR Newswire.

The company didn't give a new completion schedule for the development, which had been slated to begin pumping oil in mid- 2008. The Tahiti prospect holds an estimated 400 million to 500 million barrels of crude oil. Chevron this month postponed drilling at another deepwater project in the Gulf, called Jack, because of a rig shortage.

source:bloomberg.com