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Oil holds near $76 on Mideast tension, US stocks

Filed on September 7, 2007

LONDON - Oil held near $76 a barrel on Friday, within sight of a record high, as renewed tension in the Middle East compounded supply worries after further declines in US fuel inventories.

Crude inventories in top consumer the United States fell by a higher-than-expected 3.9 million barrels last week. Syria accused Israel of bombing its territory on Thursday and warned it could respond.

“It is still a bull trend with major concerns about US oil stock levels, though there are concerns over the US economy slowing,” said Gerard Rigby from Fuel First Consulting in Sydney. “There may be profit-taking when prices hit $78 a barrel.”

US crude rose 27 cents to $76.57 a barrel by 1103 GMT, having gained 57 cents on Thursday. London Brent crude edged up 12 cents to $74.89.

Thursday’s weekly report on US fuel inventories also showed gasoline sank 1.5 million barrels to the lowest in two years, following a series of outages in the ageing US refining system.

Adding to supply worries was tension in the Middle East, the source of nearly a third of world oil.

US crude has climbed about 3 percent this week to near the record high of $78.77 hit on Aug. 1.

“Recent price action appears a good reflection of the current market environment characterised by a combination of firming fundamentals, geopolitical tensions and growing nervousness ahead of next week’s OPEC meeting,” Barclays Capital said in a report.

Near-record prices are signalling to the Organization of the Petroleum Exporting Countries (OPEC) that the world market is very tight, the new head of the International Energy Agency told Reuters on Thursday.

But OPEC is expected to leave output curbs in place at its meeting next Tuesday in Vienna, after several members of the group have said they see no need to boost supply.

Some analysts see stronger demand in the fourth quarter, causing a supply crunch unless OPEC pumps more.

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