Oil rises on lingering refinery concerns

[May 14, 2011]  SAN FRANCISCO (AP) -- Oil rallied in the last hour of trading on Friday to settle higher, finishing the week up more than 2 percent after plunging the week before.

Last-minute buyers may be guarding against the chance that refineries in the Southeast will be affected by Mississippi River flooding over the weekend.

Most refineries in the Gulf States region don't expect to be affected by flooding. Still, some have lined their facilities with sandbags, moved equipment and prepared other emergency measures. At least one refinery near Baton Rouge, La., run by Alon USA Energy Inc., plans to close if federal engineers open a massive spillway this weekend to divert floodwaters from Baton Rouge and New Orleans. Hundreds of thousands of acres will be flooded elsewhere.

Analyst Addison Armstrong with Tradition Energy said the flooding could halt almost 253 million cubic feet of natural gas production per day in Louisiana as well, according to state officials. And there are concerns that crude oil shipments and other commercial traffic on the river could be slowed by high water, according to PFGBest analyst Phil Flynn. Delays in getting gasoline from refiners to wholesalers have already contributed to higher pump prices in parts of the Southeast and the Midwest.

Benchmark crude for June delivery settled at $99.65 per barrel, up 68 cents on the New York Mercantile Exchange. Oil has been volatile this week, ranging from $95 to $104 a barrel. It gained two and a half percent for the week after losing 15 percent last week.

Despite last week's drop in oil prices, drivers across the country are paying about the same for gasoline, with the national average at $3.982 a gallon, according to AAA, Wright Express and the Oil Price Information Service. Motorists in 15 states and the District of Columbia pay more than $4 a gallon. The average price is 17.4 cents more than it was a month ago and $1.092 more than a year ago.

Many analysts think pump prices will fall to around $3.50 a gallon or less by Memorial Day, as refineries that have been sidelined by temporary outages come back online and oil prices retreat.

The Labor Department reported that inflation in April rose to the highest level in two years as consumers paid more for gas and food products. There are signs that inflationary pressure may begin to ease as prices for oil, corn, wheat and other commodities have declined this month.

In other Nymex trading in June contracts, heating oil rose 2.85 cents to settle at $2.9422 per gallon, gasoline futures added 1.05 cents to settle at $3.0744 a gallon and natural gas gained 5.5 cents to settle at $4.311 per 1,000 cubic feet.

In London, Brent crude rose 85 cents to settle at $113.83 per barrel on the ICE Futures exchange.

[Associated Press; By SANDY SHORE]

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