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Oil prices rise on supply concerns

June 05, 2007

LONDON, June 4: Oil prices advanced on Monday on worries about tight US gasoline supplies, which remain below their average levels for this time of year, traders said. Gasoline or petrol has entered its peak demand period as the US driving season hits top gear, with millions of Americans due to take to the nation's highways en route to summer holiday hot spots.

In electronic deals on Monday, Brent North Sea crude for July delivery won 91 cents to $69.98 per barrel, after earlier touching as high as $70.15.New York's main oil futures contract, light sweet crude for delivery in July, gained 69 cents to $65.77 per barrel in floor trading.

“We look for the gasoline market to continue to occupy centre stage this week,” said James Ritterbusch, president of Ritterbusch and Associates.

“Although gasoline supplies have increased five million barrels during the past month, the shortfall against normal supply levels for this time of year has failed to contract,” he added.

The US Department of Energy had revealed last week that American gasoline stocks rose by 1.3 million to 198 million barrels in the week ending May 25, which tallied with analysts' forecasts.

However, below-average stock levels of gasoline have bolstered retail gasoline prices across the US.

Elsewhere, traders eyed key crude producer Nigeria, where volatile geopolitical tensions are also keeping prices underpinned.

Oil prices paused earlier on Monday after Royal Dutch Shell said it had resumed full output at a Nigerian facility that had been hit by unrest.

News of a reopened gasoline pipeline in the United States had also eased market fears over a possible supply crunch.

On Friday, crude futures spiked by more than a dollar as concerns mounted about Nigerian supplies amid reports that fresh unrest had forced Anglo-Dutch group Shell to suspend some of its oil exports.

“Royal Dutch Shell announced (on Monday) that it has resumed normal crude production at its 150,000 barrel per day Bomu pipeline hub in Nigeria, after the closure due to civil protests last week,” said Sucden analyst Michael Davies.

“This news followed an announcement from US Colonial Pipeline who restarted a gasoline line from Atlanta to North Carolina, after being shut on last Tuesday because of a leak.” Unrest in Nigeria, including a string of kidnappings of foreigners and pipeline attacks, has reduced the country's oil output about 25 per cent over the past year.—AFP