oil prices surge

Oil prices surge

WORLD oil prices soared overnight, breaching $US71 in London, after data showed no increase in US petrol stockpiles last week as the peak driving season in North America begins.

Brent North Sea crude for July delivery jumped $US1.14 to $US71.08 per barrel in electronic deals. The contract, which expires at the close, had gained more than a dollar yesterday in the wake of the US inventory data.

Overnight, New York's main oil futures contract, light sweet crude for delivery in July, leapt $US1.34 to $US67.60 per barrel in floor trading.

Crude prices had rallied overnight after the US Department of Energy said US inventories of motor fuel were flat at 201.5 million barrels in the week ending June 8, well below the average range for this time of year and ending a five-week streak of gains.

Market expectations had been for a rise in petrol stocks of 1.6 million barrels last week.

Oil prices are meanwhile also being supported by a decline in refinery utilisation for the second consecutive weak.

"The market was expecting a very bearish report (from the DoE) which did not materialise," Sucden analyst Michael Davies said in London overnight.

Petrol supplies remain in focus amid the current US driving season when demand for motor fuel traditionally peaks as holidaymakers hit the country's roads.

Despite recent weekly increases, petrol stocks in the United States remain at historically low levels for this time of year.

Elsewhere in the market, OPEC held steady its estimate of world demand for oil this year in a monthly report - and brushed aside calls from consuming countries that it boost supply in a bid to lower prices.

"Market fundamentals do not indicate that additional supply is necessary at this time," said the cartel, although it added that it "stands ready to relieve any emerging tightness in the crude oil market".

OPEC said that demand in the United States had progressed by 2.3 per cent in May due to a heavy demand for petrol.

OPEC also said it expected global demand for oil to increase by 1.5 per cent to 85.6 million barrels per day in 2007, the same estimate as in recent months.

The International Energy Agency has meanwhile pressured OPEC to pump more crude in order to help trim rising oil prices.

Geopolitical concerns over key crude producer Iran continued to linger, traders said.

UN nuclear chief Mohamed ElBaradei overnight called on Iran to declare a moratorium on expanding uranium enrichment work in order to defuse the crisis over fears Tehran seeks atomic weapons.

Iran, the world's fourth-biggest producer of crude, has threatened to further reduce cooperation with the UN atomic agency if new sanctions are ordered, and insists that it has mastered uranium enrichment.

The UN Security Council has imposed two sets of sanctions since December in a bid to get Iran to halt uranium enrichment - which can make fuel for reactors or for a bomb - and to cooperate with an IAEA investigation over concerns Iran seeks nuclear weapons.

Analysts warn that Iran might decide to disrupt its oil exports if hit with new sanctions.