Oil heads for $71 after MidEast cyclone disruptions

Source: Reuters 6/6/2007, Location: Middle East

Oil prices extended gains toward $71 a barrel on Wednesday to their highest in nearly two weeks, after a cyclone disrupted Omani oil and gas exports before weakening on its way to Iran. London Brent crude rose by 25 cents to $70.70 a barrel by 0549 GMT, after touching $70.80, the strongest level since May 25. U.S. light crude gained 19 cents to $65.80 a barrel.

Tropical cyclone Gonu, the strongest to reach Oman's coast since 1977, disrupted production and loading, temporarily closing a terminal shipping 650,000 barrels per day (bpd) of crude oil.It weakened on Wednesday to the equivalent of a Category One hurricane from a maximum-force Category Five, on its way to the Strait of Hormuz, a major shipping route for Gulf oil shipments, towards southeastern Iran.

"The major impact is some delays in loading. Any damage to production facilities does not seem to be on the cards," said Andrew Harrington, a commodity analyst at ANZ Bank.

U.S. gasoline inventory data due for release later on Wednesday is expected to show stocks rising for the fifth consecutive week, as refineries gradually return from regular maintenance and glitches. The peak driving season in the United States kicked off last weekend, and traders will be keen to see if gasoline inventories had built up prior to that.

"If stocks do not meet expectations, some of which have been built into the current price, then we may see prices go up," said Harrington.

Disruptions to Nigerian oil production and Iran's nuclear dispute with the West remain underlying issues affecting oil prices, said Gerard Burg, minerals and energy economist at National Bank Australia. Some 722,000 bpd of Nigerian production, or about 26 percent of the country's capacity, remained shut in due to militant attacks and sabotage.


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