Updated from 2:29 p.m. EST
Crude prices skyrocketed Friday on concerns world oil supplies would be cut after an attempted bombing at a major Saudi Arabian processing facility and continuing unrest in Nigeria.
Light, sweet crude for April delivery climbed $2.37, or 3.9%, to close at $62.91 a barrel on the Nymex. The contract gained about 3% this week as traders' worried that supplies could suffer.
The top story of the day for the energy markets was coming out of the Middle East. Three cars of suicide bombers launched an attack against a Saudi refinery, forcing their way through one of the facility's three security perimeters, according to reports. Saudi security forces kept the attack from succeeding by opening fire on the vehicles.
The cars were blown up, and three Saudi security guards were killed. Ten other guards were injured. The incident took place around a mile from the facility's inner security line, and the flow of oil wasn't affected.
"There is no interruption of physical crude but there will be a psychological impact which at least for the last trading day of the week should move prices higher," said Jim Williams, an energy analyst with WTRG Economics in London, Ark.
Crude prices soared on the news because the targeted facility handles around two-thirds, or 6 million barrels a day, of Saudi Arabia's oil output. As OPEC's largest producer, Saudi Arabia can supplement any supply shortages worldwide with its 1.1 million to 1.6 million barrels of spare daily oil production.
The runup in oil reversed recent market sentiment. On Thursday, traders overlooked the supply threats around the world and focused on the Energy Department's robust oil inventory report. Oil stocks are about 10% above last year's level, more than enough to compensate for ongoing supply disruptions in Nigeria.
"Increased geopolitical turmoil has put the so-called ample-supplies situation on the back burner," said Phil Flynn, an energy analyst with Alaron Trading in Chicago. "Whether it's Iran, Nigeria, Venezuela or you name it, there seems to be a chance that any of these hotspots could dramatically alter the supply-side universe."
Militant attacks on Nigerian oil installations have driven down the west African country's production by one-fifth, or 450,000 barrels a day. Rebels are demanding a share of Nigeria's oil wealth and have threatened to step up their attacks over the next few days. Nigeria is the fifth-largest supplier of crude to the U.S. and has become increasingly important to the U.S. as it looks to reduce its reliance on Middle Eastern oil.
A standoff with Iran over its nuclear power ambitions has also kept traders on edge. Iran resumed small-scale uranium enrichment this month, in defiance of Western threats to slap economic sanctions against the country. The U.N. Security Council is set to discuss possible actions against OPEC's second-largest crude producer on March 6.
To avert a potential trade embargo, Russian and Chinese diplomats are in Tehran trying to hammer out a solution to the crisis. Iranian officials offered information on a uranium-processing facility linked to warhead design,
reported. This is the second round of talks between the Russians and Iranians and may indicate that Tehran is trying to delay any Security Council actions.
Elsewhere, the Venezuelan government said it plans to sharply curtail the amount of air service U.S. carriers are allowed to conduct in the country. President Hugo Chavez has made no secret of his disdain for the U.S., and the move to limit airline traffic will do nothing to improve the tense relations between Caracas and Washington.
The Venezuelan government said the action was in retaliation for restrictions that have been in place for 10 years on flights to the U.S. by Venezuelan carriers.
The spike in crude prices pulled up heating oil by 6 cents to $1.72 a gallon and unleaded gasoline by 3 cents to $1.55 a gallon. Predictions of cold weather were also pushing up prices for heating oil.
Forecasts of snow and plunging temperatures for the Northeast, the country's largest consumer of heating fuel, had little effect on natural gas prices. The March contract lost 34 cents to $7.11 per million British thermal units on higher-than average fuel supplies. Natural gas inventories are 24% above last year and 48% more than the five-year average, the Energy Department reported Thursday.
The large supply cushion will likely keep prices low through the rest of the winter.