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New York: Oil prices shot up $6 a barrel yesterday, rising to the highest level in over two weeks as escalating tensions with Russia stoked fears of a disruption of energy shipments to Western countries.
Crude's rally mimicked the wild price swings seen last month and have halted oil's slide back towards $100 a barrel. A weaker US dollar and worries about tightening output from Opec countries are also supporting prices.
Tensions with Russia about a deal between Washington and Poland to install a missile defence system in Eastern Europe and the continued presence of Russian troops in Georgia contributed greatly to the bullish mood.
Light, sweet crude for October delivery jumped $6.32 to $121.88 a barrel on the New York Mercantile Exchange. It was crude's highest trading level since August 4. In London, October Brent crude rose $5.57 to $119.93 a barrel.
"The sellers are backing away for now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois. "If military activity heats up again, pipeline flows into Europe could be disrupted and that would affect the United States as well." Oil's jump came a day after the US government report a huge rise in US crude inventories. But other supplies were less abundant.
Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels in the week ended Aug. 15, the US Energy Department's Energy Information Administration said Wednesday. Meanwhile, distillate inventories - which include heating oil and diesel fuel - rose by less than expected, the EIA said.
That was enough to offset a hefty 9.4 million barrel rise in US crude stocks last week when the average analyst forecast had been for a 1.7 million barrel increase.
Something for everyone
"That report had something for everyone," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "On the one hand, the crude inventory build-up was quite strong, but the gasoline draw was also very prominent." But growing concerns over Russia's standoff with Georgia and Nato grabbed the attention yesterday.
JBC Energy in Vienna said the "political risk premium of oil prices" had widened to more than $10 a barrel, which could be attributed at least in part to the Russian angle.
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