Crude-oil futures prices climbed Tuesday on concerns over tightening near-term supplies from Nigeria and the North Sea.
Brent crude oil, the global benchmark, rose sharply while U.S. benchmark crude gained for the first time in five days, helped by rising equities and signs of strength in the domestic housing sector and consumer confidence.
Light, sweet crude oil for July delivery on the New York Mercantile Exchange settled 86 cents higher, at $95.01 a barrel, the highest price in a week.
July-delivery Brent crude oil on the InterContinental Exchange settled 1.6%, or $1.61, higher at $104.23 a barrel, the highest price since May 20. Brent traded at a premium of $9.22 a barrel to the U.S. benchmark, the biggest spread since May 15.
Brent was supported by concerns that exports of Nigerian oil will be constrained and as scheduled maintenance work on Norwegian fields reduces flows. A fresh dispute between Sudan and South Sudan is reducing exports of similar-grade crude oil, and worries over the potential for an escalation of fighting in Syria are growing after the European Union decided to end an embargo on arms sales to rebels.
The U.S. consumer-confidence index rose to a five-year high of 76.2 in May, the Conference Board said Tuesday. Consumers were especially optimistic about the next six months in terms of the U.S. economy, which is significant as the Fed could begin to taper its monthly asset purchases within that period.
"It was a lot better than people anticipated, but we'll have to see if it translates into higher petroleum consumption," said Kyle Cooper, analyst at IAF Advisors. Economists had expected a reading of 72.
Oil found strength also in news that U.S. home prices rose 1.4% in March and 10.9% from the year-ago period, the biggest annual growth rate since April 2006. The seasonally adjusted rise in home prices was 1.1%, according to S&P/Case-Shiller data.
Crude's rise comes as ministers from the Organization of the Petroleum Exporting Countries begin gathering for talks Friday on oil-production policy.
Saudi Arabia's Oil Minister Ali al-Naimi on Tuesday said he views the market as well-supplied and said inventories are balanced. Analysts said the comments from the world's biggest oil exporter suggest OPEC isn't likely to agree on any changes in output policy this week.
According to the International Energy Agency, global oil demand will rise by 800,000 barrels a day this year, while non-OPEC output, led by gains in output from U.S. shale-oil fields, will rise by 1.1 million barrels a day, trimming OPEC's market share.
In the near term lower-than-usual volumes of exports from key producing regions such as Nigeria, as well as coming North Sea maintenance, are tightening supply, analysts said. In addition, Sudan on Tuesday threatened to close the pipeline carrying crude shipments from South Sudan and said it won't negotiate with rebels it accuses South Sudan of backing.
Supply disruptions could push oil prices higher throughout the summer, said Morgan Stanley in a note published Tuesday. Crude oil loadings are expected to decline to their lowest level since at least 2009, as disruptions of Ekofisk in the North Sea and lower Nigerian flows cut supply by 610,000 barrels a day below June 2012 levels, the bank said.
"Near-term risks remain, but we would be buyers as Brent approaches $100" a barrel, Morgan Stanley said.
According to early estimates from seven analysts surveyed by Dow Jones Newswires, U.S. crude oil inventories fell by 400,000 barrels in the week ended May 24, as refiners boosted operations by 0.4 percentage point from a week earlier.
Gasoline stocks are expected to fall by 300,000 barrels. If the forecast is correct, the slim decline would keep stocks at nearly 10% above year-earlier levels, the biggest surplus since September 2010.
Distillate stocks, comprising heating oil and diesel fuel, are expected to increase by 100,000 barrels.
Release of the closely watched government survey from the Energy Information Administration is delayed this week until 11 a.m. EDT Thursday due to the Memorial Day holiday, which was celebrated Monday. The American Petroleum Institute, an industry group, will release its survey late Wednesday afternoon, one day later than usual.
June-delivery heating oil settled 4.97 cents, or 1.7%, higher, at $2.9066 a gallon. The contract had dropped 9.39 cents over the prior four days.
Analysts said the consumer confidence figure helped support heating oil, which trades as a proxy for diesel fuel demand. A rebound in the economy would lift demand for goods, which are moved by trucks and trains powered by diesel.
June reformulated gasoline blendstock futures settled 1.38 cents higher, at $2.8528 a gallon, the highest settlement since May 20.
Copyright (c) 2012 Dow Jones & Company, Inc.
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