Gulf tensions push oil past $64Crude above $64 a day after spiking to $68 on rumors of a military confrontation with Iran; U.S. inventory decline smaller than thought.NEW YORK (CNNMoney.com) -- Oil prices jumped over $64 a barrel Wednesday - a day after briefly spiking $5 on rumors of a military clash with Iran - as tensions in the Gulf remained high. U.S. crude for May delivery rose $1.32 a barrel to $64.25 on the New York Mercantile Exchange. In its weekly inventory report, the government said supplies of gasoline fell less than expected, which brought oil prices down from earlier highs. Crude surged to $68.09 in after-hours trade Tuesday, hitting a six-month high, after rumors circulated in the market that a U.S. warship had clashed with an Iranian navy vessel. Prices quickly eased after the White House and Navy denied that any confrontation had taken place. But all eyes Wednesday remain on the Gulf as a second U.S. aircraft carrier moved in to carry out military exercises and Iran continued to hold 15 British marines and sailors it seized last Friday, claiming they were trespassing in Iranian waters. "Every day that this hostage crisis continues is another day with the potential for extreme action, military action," Peter Beutel, an oil analyst at Cameron Hanover, said in a research note. "The fact that Iran continues to enrich uranium against the UN Security Council's resolutions means that there are those in the US and Britain who want to shoot first and ask questions later," said Beutel. "That has the potential of pushing oil prices to numbers not previously seen." Britain dispelled rumors Tuesday that it had launched a raid to rescue its military personal, which it says were operating in Iraqi waters conducting routine search operations in an effort to cut off arms to Iraqi militants. The marine boundary between Iran and Iraq is disputed by both countries. Earlier Wednesday Britain increased pressure on Iran, releasing evidence it said showed its forces were operating in Iraqi waters and freezing bilateral contacts until the crisis is resolved. Iran said Wednesday it would release one British female sailor. Iran is the world's fourth largest oil exporter and sits astride the narrow Strait of Hormuz, through which passes a quarter of the world's oil. Crude prices, having hit a 12-month low of just below $50 a barrel last January, have broken above their multi week trading range of the high $50s and low $60s. Prices still remain well below their all-time non-inflation adjusted trading high of $78.40 a barrel hit last July. Stocks of oil companies, including Exxon Mobil (Charts), Chevron (Charts), ConocoPhillips (Charts) and BP (Charts), generally rise and fall with the price of crude. Domestic supplies In the latest inventory report, the government said gasoline supplies fell by 300,000 barrels, less than the 1.8 million barrel decline predicted by a Reuters poll. Crude stocks fell by 900,000 barrels and distillates, used to make heating oil and diesel fuel, fell by 700,000 barrels. Analysts had called for a 1.6 million barrel increase in crude stocks and a 1.2 million barrel drop in distillates. U.S. crude oil stocks are adequate to meet gasoline-making needs this summer, and the government is "not uncomfortable" with global crude oil supplies, an Energy Department official said Wednesday. Although the decline in gasoline supplies was less than predicted, it's still the seventh straight week to see a fall in gasoline stocks, just as the U.S. gears up for the summer driving season. Declining gas stocks have been blamed on an extended period of refinery maintenance and the annual switchover to cleaner burning summer gas. Dwindling gasoline supplies, along with rising crude prices, have been the main factor in pushing up nationwide average retail gasoline prices, which have risen roughly 18 percent over the last month. Reuters contributed to this report. _______________ |
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