Supply Worries, Iran Jitters Lift Oil
Updated from 11:52 a.m. EDT
Crude oil prices moved higher in New York Friday on rumors of a possible engagement between U.S. and Iranian navy vessels in the Persian Gulf.
Reports of new pipeline outages around the globe were also supporting higher crude prices.
West Texas crude for June delivery gained $2.46 to $118.52 a barrel on the New York Mercantile Exchange. The May WTI contract expired after the close of Thursday's trading session.
Brent crude was up $2 to $116.34 a barrel, and reformulated gasoline rose 3.5 cents to $3.05 a gallon. Heating oil gained 4.5 cents to $3.30 a gallon, and near-term natural gas climbed 17 cents to $10.96 per million British thermal units.
Prompting the spike in crude prices was a report by
Fox News
that a cargo vessel working for the U.S. Navy fired on two Iranian speedboats Thursday after they failed to respond to warning signals.
The cargo vessel, the Westward Venture, was approximately 50 miles off the coast of Iran when the speedboats approached, the report said. The vessel blew its whistle and sent up flares before firing warning shots with its on-board machine guns, according to the report.
Also boosting crude prices was the announcement by
BP
(BP) - Get Report
that it may be forced to shut down its Forties pipeline system in the United Kingdom because of a strike at Scotland's Grangemouth refinery.
According to a BP representative, the company is prepared to ramp down the pipeline's throughput on Saturday if an agreement with the striking workers isn't reached.
The Forties pipeline has a total throughput capacity of 1.1 million barrels of oil per day, but actual throughput is generally about 700,000 barrels a day, or 42% of the U.K.'s total oil production.
Edward Meir, an energy analyst at MF Global, said the strike at the Grangemouth refinery "has wreaked havoc" in the physical energy markets and is causing "queues at gas stations in Scotland as drivers fill up ahead of the weekend."
Elsewhere,
Exxon Mobil
(XOM) - Get Report
has begun to reign in oil production in Nigeria due to striking workers there.
Additionally,
Royal Dutch Shell
(RDS.A)
reported that another of its oil pipelines in the Niger Delta region was sabotaged by armed rebels. The attack was the second suffered by Shell this week, and follows a series of attacks last week that forced Shell to suspend contractual deliveries from its main Nigerian export terminal.
The repercussions of the pipeline outages cap a record-setting week for West Texas crude futures. The May WTI contract reached an all-time closing high of $119.74 a barrel on Tuesday and came within 10 cents of piercing the psychologically significant $120-a-barrel level.
Regardless of the past week's advance, Meir said in a research note that it might not be the right time to adopt a strongly bullish attitude in the oil markets. Potentially pressuring oil is a renewed display of strength in the U.S. dollar, which Meir believes will likely extend until next week's meeting of the
Federal Reserve
.
The price of oil tends to fall when the value of the U.S. dollar rises because oil is denominated in dollars in international markets.
Also supporting oil sellers was the latest data on open interest positions in the crude markets. The data indicated a 90,000-lot decline in WTI positions during the week. "Without these contracts flowing back in, the upside momentum could remain sluggish," Meir said.
Meanwhile, stocks in the integrated energy space were mixed. BP advanced 1.2% to $68.64 a share.
ConocoPhillips
(COP) - Get Report
edged 0.8% higher to $83.56, and
Chevron
(CVX) - Get Report
was 0.9% lower at $91.55.
Domestic exploration and production stocks were mostly to the upside.
Apache
(APA) - Get Report
climbed 1.2% to $134.86. Shares of
Chesapeake
(CHK) - Get Report
jumped 2.3% to $53.98, and
Occidental Petroleum
(OXY) - Get Report
was 2.4% higher at $84.79.








