Oil prices surge as US energy reserves slump
DATE:2007-8-30  FROM:  AUTHOR:  DOWN:2766
World oil prices shot higher on Wednesday as traders absorbed tumbling energy stockpiles in the world's leading consumer country, the United States.

Traders also kept one eye on volatile world stock markets amid concerns over the long-term impact on global crude demand.

The price of Brent North Sea crude for October delivery leapt 1.12 dollars to 71.67 dollars per barrel.

New York's main futures contract, light sweet crude for delivery in October, soared 96 cents to 72.69 dollars per barrel.

The US Department of Energy (DoE) announced Wednesday that American crude oil inventories plunged 3.5 million barrels in the week ending August 24.

That was nearly six times market expectations for a drop of 600,000 barrels.

The DoE added that US gasoline or petrol inventories dived by 3.6 million barrels.

That followed a drop of 5.7 million barrels in the previous week, and beat analysts' consensus forecasts for a decrease of 2.5 million barrels.

"With gasoline inventories standing at very low levels, refinery outages plaguing the market and demand running at an all-time high, further gains are likely," warned Barclays Capital analysts.

Motor fuel inventories remain at lower-than-normal levels as refiners in the United States have struggled to keep up during the peak demand driving season, which began in May, when many Americans hit the roads for their holidays.

Crude futures had sunk on Tuesday as falling world stock markets stoked concerns over oil demand, traders said.

"Renewed concerns over global economic growth ... triggered a further broad commodity sell off," said Sucden analyst Andrey Kryuchenkov in reference to Tuesday's losses.

"It seems that renewed fears about the subprime mortgage market in the US have managed to outweigh concerns about a series of fresh refinery glitches in North America."

Traders' worries about demand from the United States, the world's biggest energy consumer, resurfaced Tuesday after a monthly survey showed US consumer confidence -- a key gauge of economic well-being -- fell amid a deepening housing market crisis.

Their worries were further compounded after US Federal Reserve policymakers agreed the housing sector will remain a drag on overall economic growth for some time, dealers said.

Despite the recent financial turbulence, oil demand was likely to remain strong and the Organisation of the Petroleum Exporting Countries cartel should increase output, the Financial Times on Wednesday quoted the International Energy Agency (IEA) as saying.

Prices in the 70-dollar range were "too high", the newspaper quoted the IEA's deputy executive director, William Ramsay, as saying.

IEA head Claude Mandil told the specialist Arab Oil and Gas review meanwhile that "more crude oil is needed, therefore, but unfortunately the signals being sent out by OPEC do not leave us much hope in that regard."

The OPEC oil producers' grouping meets on September 11 in Vienna but dealers do not expect the cartel to adjust its output ceiling.

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