Oil Prices Rise Above $60 a Barrel

NEW YORK -- Oil prices rose above $60 a barrel Wednesday after a spate of refinery shutdowns threatened to cut into supply. Increasing tensions over Iran's uranium enrichment program also helped to boost prices.

Light, sweet crude for April delivery on the New York Mercantile Exchange climbed $1.27 to $60.12 a barrel in afternoon trading. Brent crude for April delivery also rose $1.44 to $59.42 a barrel on the ICE Futures Exchange in London.

The refinery shutdowns also drove products higher. Heating oil rose nearly 4 cents Wednesday to $1.5848 a gallon, while natural gas futures rose 14 cents to $7.725 per 1,000 cubic feet. Gasoline futures gained more than 5 cents to $1.7000 a gallon in afternoon trading.

TEPPCO Partners LP said Wednesday that part of a refined products pipeline was shut down after a leak was discovered in Indiana, according to Dow Jones Newswires. TEPPCO gave no estimate of how much diesel was lost or when the pipeline will be back in service.

The news comes on the heels of a Dow Jones report late Tuesday that said BP shut down its Northstar oil field off the northern coast of Alaska after a small leak was found. The shutdown will take about 40,000 barrels off-line each day. The company doesn't know when the field will resume operations.

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"The BP news late yesterday didn't have that much of pop on the market, but after the one in Indiana, these refinery issues got the market back on the upside," said Phil Flynn, an analyst at Alaron Trading Corp. "Some people are also thinking that Iran is adding a bit to the buying in the market today."

The International Atomic Energy Agency, the U.N nuclear watchdog, was expected to confirm on Thursday that Iran - OPEC's No. 2 exporter _ continues to enrich uranium, a finding that could trigger harsher U.N. sanctions.

The news comes a day after Iran's President Mahmoud Ahmadinejad offered a more conciliatory tone on the issue, saying it was no problem for Iran to halt enrichment, but that "fair talks" demanded a similar gesture from the West.

Traders are also looking to the release of the government's fuel stocks data due out Thursday.

Data from the Department of Energy is expected to show domestic crude oil stockpiles rose in the week ended Feb. 16, while distillates are seen falling, according to a Dow Jones Newswires survey of analysts.

Crude oil inventories are expected to build by about 700,000 barrels, according to the mean of nine analysts' forecasts. Distillates, which include heating oil and diesel, are expected to fall by 2.8 million barrels.

Gasoline inventories are seen building by about 100,000 barrels, according to the analysts' average.

"This report is likely to reflect some of the coldest temperatures we've had" this winter, Flynn said.

Bitterly cold temperatures in the first weeks of February helped boost oil prices to nearly $60 a barrel from a 20-month low of $49.90 on Jan. 18, after an unseasonably warm January.

However, oil prices dropped more than $1 a barrel on Tuesday after warmer weather moved into the Northeast, which consumes 80 percent of the nation's heating oil. The U.S. National Weather Service is forecasting above-normal temperatures in the region through March 5.

"People are thinking the U.S. weather is going to be much warmer than expected, so heating oil demand should be easing," said Tetsu Emori, chief commodities strategist with Mitsui Bussan Futures in Tokyo.

The National Oceanic and Atmospheric Administration also expects fuel demand in the region to be below long-term averages this week, the first such forecast in a month.

Tim Evans, an energy analyst at Citigroup Futures Research, pointed out that while demand for heating oil typically declines week by week during this time of year, inventories also fall through March and into April.

"The typical seasonal low occurs in the third week of April," Evans said.

Editor's note:
Oil prices Headed for a Meltdown – Find Out More Here