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Oil Advances on U.S. Gasoline Inventories, Shell Nigeria Spill

Source: Bloomberg 3/5/2007, Location: North America

Crude oil rose on speculation that U.S. gasoline inventories declined for a fourth week and as Royal Dutch Shell Plc said a pipeline spill in Nigeria cut production by 187,000 barrels a day.

Gasoline stockpiles probably dropped 1.55 million barrels, or 0.7 percent, in the week ended March 2, according to the median estimate of 14 analysts in a Bloomberg News survey. Oil also gained as Shell said it doesn't know how long it will take to repair a pipeline in Nigeria, Africa's largest producer.

Crude oil for April delivery rose as much as 73 cents, or 1.2 percent, to $60.80 a barrel in after-hours electronic trading on the New York Mercantile Exchange and was at $60.43 at 1:23 p.m. in London.

``The gasoline market is extremely strong'' as the summer driving season approaches in the Northern Hemisphere, said Julian Keites, a broker at Fimat International Banque SA in London. ``The refinery issue is still around,'' he added.

Refinery maintenance to make more gasoline and less heating oil usually occurs in late February and March as cold weather wanes. Gasoline demand in the U.S., where 10 percent of the world's oil is used for motor fuel, rises during summer vacations and has peaked in June or July in four of the past five years.

Shell cut production by 187,000 barrels a day and closed 10 pumping stations after a pipeline spill in the Niger River delta, spokesman Andre Romeyn said today. Shell, the biggest international producer in Nigeria, doesn't know what caused the leak or how long repairs will take, he said.

Nigeria Attacks

Previous attacks by militant groups have forced Shell's Nigerian operations to slash output by about 500,000 barrels a day, almost a quarter of the country's production. Nigeria pumped 2.18 million barrels of oil a day last month, according to data compiled by Bloomberg News.

Brent crude oil for April settlement gained as much as 95 cents, or 1.6 percent, to $61.49 a barrel on the London-based ICE Futures exchange and traded at $61.15.

U.S. gasoline consumption in the four weeks ended Feb. 23 averaged 9.1 million barrels a day, 1.3 percent higher than the same period a year ago, according to Energy Department data.

Gasoline for April delivery rose as much as 1.37 cents, or 0.7 percent, to $1.8584 a gallon in New York and traded at $1.8525. Gasoline ``wants to break above $2,'' Fimat's Keites said.

U.S. Inventories

``Another marked draw in gasoline stocks'' in the U.S. ``should continue to lend support'' to the oil price, analysts at Vienna-based PVM Oil Associates GmbH said in a report today.

Refineries probably operated at 85.7 percent of capacity, down 0.3 percentage point, in the week ended March 2 from the week before, according to the Bloomberg News survey. U.S. distillate stockpiles, a category that includes heating oil and diesel, probably declined 2.75 million barrels from 124.5 million the prior week.

U.S. crude-oil stockpiles probably climbed 2.03 million barrels in the period from 329 million barrels the prior week, according to the median of responses.

A cold snap in the U.S. Northeast, the nation's largest consumer of heating oil, is boosting demand for fuel, AccuWeather Inc., a forecaster based in State College, Pennsylvania, said in a report on its Web site. ``Air pouring straight down from the depths of the Arctic'' will cover the region and the Great Lakes, it said.

Home-heating demand in the Northeast will be 34 percent above normal in the week to March 12, said Weather Derivatives, a forecaster in Belton, Missouri.

U.S. Chill

The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's crude, will probably keep production quotas unchanged when ministers meet March 15, after announcing cuts of 1.7 million barrels a day since October, Algerian Oil Minister Chakib Khelil said March 3.

OPEC members cut output 0.3 percent to an average 29.89 million barrels a day in February, according to a Bloomberg News survey of oil companies, producers and analysts. The total for January and February included an estimate for Angola, which became OPEC's 12th member on Jan. 1.

OPEC's basket price, a weighted average of 11 blends produced by OPEC nations, fell $1.36 to $57.20 a barrel yesterday.

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