Oil up 2 pct, frets on war, Nigeria, gasoline supply

URL Reuters, 03.27.03, 2:18 AM ET

SINGAPORE, March 27 (Reuters) - Oil prices rose two percent on Thursday, boosted by possible prolonged supply stoppages from Iraq, as U.S.-led forces try to oust Saddam Hussein, and Nigeria where civil unrest has cut crude output by 40 percent. Data showing a fall in U.S. gasoline stocks, at a time when refiners are normally scrambling to build inventory, pushed U.S. gasoline prices sharply higher with traders fretting over the chances of a supply crunch during peak demand in the summer. At 0701 GMT, U.S. light crude was up 64 cents at $29.27 a barrel. London's Brent crude was 48 cents higher at $25.77 a barrel. "OECD stocks are relatively low and that's a bit of a worry. Things are tight. The market is probably getting a little nervous ahead of summer driving season. The United States really needs sweet Nigerian crude to crack into gasoline," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney. Nigerian crudes produce a high yield of gasoline when refined, ideal for U.S. refiners which should be cranking up gasoline output ahead of the peak-demand summer vacation season. Bloody clashes between warring tribal factions in Nigeria's oil-rich Niger Delta have shut down 800,000 barrels per day (bpd) of output from Africa's biggest producer. Ethnic leaders had agreed to a ceasefire which should allow foreign multinationals, including Royal Dutch/Shell and ChevronTexaco, to return to the country and restore normal output of 2.2 million bpd, local officials said on Wednesday. Nigeria is a major oil exporter to the United States and sent more than 560,000 bpd last year to the world's biggest oil consumer. Energy Information Administration data on Wednesday showed U.S. gasoline tanks declined 2.1 million barrels in the week to March 21 to 199 million barrels, down 16 million barrels from a year earlier. U.S. unleaded gasoline futures made strong gains of 1.58 cents to 94 cents a gallon. An anti-government oil workers' strike in Venezuela had also cut into U.S. gasoline supplies and U.S. refiners were unable to step up gasoline production as much as normal as they worked to meet heating fuel demand during a cold northern winter. The EIA reported a 3.7 million rise in U.S. crude inventories to almost 274 million barrels, above the 270 million mark that U.S. government considers a minimum to keep the nation's refineries operating smoothly, but 56 million barrels below a year earlier. The OPEC producers' cartel has said it will fill any supply disruption due to the Iraq war or the Nigeria clashes, although its crude is not an ideal replacement for the Nigerian grade. WAR ROLLS ON Iraq's oil exports, about 1.8 million bpd before the U.S. launched its invasion on March 20, have come to a standstill. But supplies from other Middle East producers, accounting for 40 percent of world trade, have been running smoothly. Kuwait had shut some oil wells near the Iraqi border at the start of hostilities but restoring some production on Wednesday. Saudi Arabia, Kuwait, Iran, Qatar and the United Arab Emirates ship about 15 million bpd through the Gulf. Fears Iraq might destroy oilfields in a replay of the massive damage inflicted by retreating Iraqi troops in the 1991 Gulf War have not materialised. Iraq's southern Rumaila oilfields, which account for about 60 percent of its 2.5 million bpd production, have been secured by U.S. and British forces with little damage to infrastructure. Kuwaiti officials have said that any remaining wellhead fires in the Rumaila field could be out in three to seven days. U.S. warplanes have been pounding frontline Iraqi positions about 35 km (20 miles) east of the northern oil city of Kirkuk, where oil wells can pump up to 900,000 bpd. Meanwhile, about 1,000 U.S. paratroopers prepared a new front in the north. U.S. President George W. Bush warned on Wednesday against expectations for a quick victory, saying "the war is far from over". U.S. forces have met increasing resistance from Iraqi troops as they have drawn closer to Baghdad in the last few days.