Oil prices rise above USD 80 a barrel

Oil prices gained Thursday after rising to close above US$80 a barrel in the previous session despite an increase in U.S. crude and gasoline inventories.

Photo: Oil prices rise above USD 80 a barrel

Light, sweet crude for November delivery rose 37 cents to US$80.67 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore.

November Brent crude added 45 cents to US$77.88 a barrel on the ICE futures exchange in London.

A small decline in oil inventories at the Cushing, Oklahoma, delivery point for Nymex crude may have underpinned the strength in the futures spreads, analysts said.

In its weekly report, the U.S. Energy Department's Energy Information Administration said crude inventories rose by 1.8 million barrels during the week ended Sept. 21, countering the average estimate of analysts surveyed by Dow Jones Newswires that oil supplies would fall by 1.8 million barrels. Gasoline inventories grew by 600,000 barrels last week, three times the 200,000-barrel increase analysts had expected.

Refinery utilization plunged by 2.7 percentage points to 86.9 percent of capacity. Analysts had expected an 0.6 percentage point decline. Lower refinery activity could reflect the impact of Hurricane Humberto, which shuttered several Gulf Coast refineries two weeks ago. But it could also reflect the beginning of heavy seasonal maintenance in the Midwest, according to analysts.

The EIA reported inventories of distillates, which include heating oil and jet fuel, grew last week by 1.6 million barrels, more than the expected 1.1 million-barrel increase.

Crude futures reached nearly US$84 a barrel last Thursday, the day the October contract expired. November futures, the new front-month contract, haven't traded above US$82.40 a barrel, and had fallen for three straight trading sessions, settling below US$80 Tuesday.

Some analysts attributed oil's late reversal to rise on Wednesday to a technical factor: Strength in the spread, or difference, between future oil contracts.

Investors closely scrutinize such spreads for signs the market's so-called backwardation structure - in which nearer-month oil contracts are more expensive than later month contracts - might be ending. Backwardation is a sign that supplies are tight, and tends to boost near-term futures prices.

When backwardation didn't decline or disappear in the wake of the EIA report, and indeed increased in some cases, some investors saw a sign that oil prices are likely headed higher in the near term, analysts said.

Heating oil futures were flat at US$2.1826 a gallon (3.8 liters) while gasoline prices dropped 0.15 cent to US$2.0259 a gallon. November natural gas futures lost 3.5 cents to US$7.011 per 1,000 cubic feet.