Oil rises on US stock report, Middle East tension

[July 10, 2008]  VIENNA, Austria (AP) -- Oil prices rose Thursday following reports of diminished U.S. crude stocks and renewed Mideast tensions.

Nigeria's main militant group also vowed to resume attacks in the country's oil-rich river delta region because of Britain's recent pledge to back the government in the conflict there.

The Movement for the Emancipation of the Niger Delta is behind two years of crippling attacks on Nigeria's oil infrastructure that have sliced the country's normal daily oil output by a quarter and contributed to the worldwide surge in the price of crude. MEND, as the group is known, told The Associated Press that it was abandoning a two-week-old cease-fire as of midnight Saturday.

Nigeria, Africa's biggest crude producer, is a top supplier of oil to the United States.

"The bull run is really not over yet. The Iranian nuclear situation remains fluid and the market faces supply-side risks with global demand outpacing supply," said Victor Shum, an oil analyst with Purvin & Gertz in Singapore.

"It remains likely that pricing will gain strength and rise to a new peak in the coming weeks," he said.

Light, sweet crude for August delivery rose 31 cents to $136.36 in electronic trading on the New York Mercantile Exchange by noon in Europe.

The contract seesawed Wednesday in the floor session before settling a penny higher at $136.05, ending two days of sharp declines that left prices 6.4 percent below last week's record high.

Figures from the Energy Information Administration showed U.S. oil supplies fell 5.9 million barrels, or 2 percents, last week. That is greater than the drop of 1.9 million barrels forecast by analysts surveyed by the energy research firm Platts.

Prices often rise in response to large drops in U.S. oil supplies. But gains were tempered because much of the inventory decline was on the West Coast and not representative of overall supplies, said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.

In addition, gasoline stockpiles rose more than expected, partly offsetting the decline in crude. Inventories of distillate fuel, which include diesel and heating oil, also rose, but less than analysts anticipated.

"Bottom line, yesterdays report gave us more of the same, i.e. crude oil stocks are drawing, but that is what is supposed to happen in July and gasoline stocks are building, that is not supposed to happen in July," said analyst and trader Stephen Schork in a research note.

In Washington on Wednesday, House Speaker Nancy Pelosi called on President George W. Bush to open up the country's Strategic Petroleum Reserve to help stabilize oil prices. Bush has repeatedly rejected calls to use oil from the emergency government stockpile.

"Releasing some oil reserves may improve sentiment but the impact on pricing will be small. It's unlikely to happen because there is no emergency, no oil shortage," Shum said.

Reports that Iran's elite Revolutionary Guards fired missiles during war games sent oil prices shooting as high as $138.38 on Wednesday. Iranian officials said the exercise was to show that the key oil producer can retaliate against a U.S. or Israeli attack.

The barrage was said to include a new version of the Shahab-3 missile, which officials have said has a range of 1,250 miles. That makes it capable of striking Israel, Turkey, the Arabian peninsula, Afghanistan and Pakistan.

Iran is the world's fourth-largest oil producer and OPEC's second-largest exporter. Oil traders fear any military conflict could prompt Iran to block the Strait of Hormuz, a passageway that handles about 40 percent of the world's tanker traffic.

In other Nymex trading, heating oil and gasoline futures were basically flat at $3.8566 and $3.38165 a gallon. Natural gas futures rose by more than 4 cents to $12.05 per 1,000 cubic feet.

August Brent crude rose 33 cents to $136.91 a barrel on the ICE Futures exchange in London.

[Associated Press; By GEORGE JAHN]

Associated Press Writer Eileen Ng contributed to this report from Kuala Lumpur, Malaysia.

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