Oil: Prices rise on tight US supplies

<a href=www.nzherald.co.nz>The New Zealand Herald 17.06.2003 8.30 am

NEW YORK- Oil prices rose on Monday (NY time) as low stocks in the US Midwest pulled up prices across the international market.

US crude oil futures for July rose 53 cents to US$31.18 per barrel, back within US$1.40 of last week's three month highs and 20 per cent up from the same time last year. International benchmark Brent crude gained 26 cents to US$26.65.

US crude oil normally trades at around US$1 to US$2 per barrel premium to Brent due to the US need to draw in imports to feed its oil needs. The spread stood at more than US$4 on Monday.

US prices have been driven up by low inventories, especially in the Midwest region, which has a pivotal impact on oil prices as it is home to the Cushing, Oklahoma crude futures delivery hub.

Midwest stocks have dwindled to 55 million barrels, below their normal level of around 70 million barrels for this time of year.

This has driven the July crude futures contract to a US$1.50 premium to the August contract.

"Anyone short of July will be struggling now as stocks are low in the Midwest," said Christopher Bellew of brokers Prudential-Bache International.

Delays in the resumption of Iraq's postwar oil exports have prevented US crude inventories from rebuilding after disruptions in Venezuela and Nigeria ran down supplies earlier this year.

Oil inventories are well below normal worldwide, although the deficit was reduced substantially last week by an upwards revision in stock data made by the International Energy Agency.

The addition of 80 million barrels to its end-March stock estimate for the industrialized world knocked prices sharply lower on Friday. Most of the extra oil was in Europe rather than the US