|Oil, gas rise on supply concerns
NEW YORK - Oil and gasoline futures rose Friday, supported by concerns about tight supplies and expectations OPEC will keep output steady at a long-awaited meeting next week.
Prices reversed from earlier losses as oil traders shrugged off a weak employment report.
The supply concerns were driven in part by Thursday's Energy Department inventory report, which said supplies of both crude oil and gasoline fell last week. Investors expect little relief from the Organization of Petroleum Exporting Countries, which is widely expected to keep its output targets unchanged when oil ministers meet Tuesday in Vienna.
Late news that a pipeline that carries oil from Canada and the Rockies to the Midwest had been shut down contributed to the supply concerns.
Energy traders also weighed Friday's Labor Department report that employers cut payrolls by 4,000 jobs in August, the first drop in four years. Analysts had expected payrolls to grow by 110,000 jobs. That news has some energy investors worried that credit tightness resulting from problems in the mortgage industry is spreading to other sectors, which could curb demand for oil and gasoline.
"Oil markets remain focused on a potential downdraft in demand," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.
While the jobs report depressed prices earlier in the day, investors started buying in the last hour of trading to square positions ahead of the weekend.
"I think this is the typical Friday rally," Rafield said. "Fundamentals for oil remain supportive."
Light, sweet crude for October delivery rose 40 cents to settle at $76.70 a barrel on the New York Mercantile Exchange after rising as high as $77, while October gasoline added 1.47 cents to settle at $1.9864 a gallon. Earlier, both contracts had fluctuated frequently between gains and losses.
Nymex oil futures ended the week up $2.66, or 3.6 percent. Gasoline futures rose 2.19 cents this week, or 1.1 percent.
In London, October Brent crude rose 30 cents to settle at $75.07 a barrel on the ICE Futures exchange.
Thursday's inventory report was not uniformly bullish. Refinery activity jumped much more than expected, leading many traders to reason that gasoline supplies will grow.
The conflicting information left some investors confused, and that caused some of Friday's price volatility, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.
"Now, they're trying to make up their minds whether they want to keep their positions or sell and run," Ritterbusch said.
At the pump, meanwhile, prices continued to rise. The average national price of a gallon of gas rose 1.7 cents overnight to $2.824, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May. At that time, futures were rallying on concerns that refineries weren't producing enough gasoline to meet peak summer driving demand.
Several weeks of growing supplies and refinery activity appeared to alleviate those fears. But gasoline inventories have fallen in recent weeks.
Balancing supply worries is the fact that summer driving season has ended. Demand is still on the rise, according to government data, but at a tepid pace of 0.5 percent.
Analysts are divided on whether gas prices will continue rising, or have hit their seasonal peak.
"Clearly, the demand growth that we were seeing earlier in the year has slowed," Rafield said.
However, analysts largely agree that OPEC will take no action to boost output next week. But the closer oil trades to $80 a barrel, the greater the chance the oil cartel will take some small steps to increase production, Ritterbusch said. That's because ministers fear oil at that price will cut demand.
"With $70 crude oil, they're happy," Ritterbusch said. "That's where they like it."
In other Nymex trading, heating oil futures rose 0.64 cent to settle at $2.1432 a gallon, but natural gas futures fell 14.9 cents to settle at $5.501 per 1,000 cubic feet.
Distillate inventories, which include heating oil, jumped last week but are still below historic averages. Heating oil prices are above year-ago levels, which could mean higher oil heating bills this winter.
Natural gas inventories, on the other hand, are at record highs. A separate Energy Department report on Thursday said supplies grew by 36 billion cubic feet last week. Prices are lower than they were a year ago, meaning natural gas customers could see lower bills this winter.