Updated from 12:04 p.m. ESTOil prices soared above $64 a barrel Friday, continuing a weeklong bull run that has added 6% to the front-month contract. Light, sweet crude increased 35 cents to settle at $64.26 a barrel thanks to ongoing refinery maintenance, lower domestic crude inventories and supply problems in Iran and Nigeria. "Supplies seems absolutely adequate, but political problems are not," said Eric Bolling, an independent oil trader in New York. "As you get closer to the weekend, people are more concerned about geopolitical issues." An Energy Department report Wednesday showed that domestic oil stockpiles dropped for the first time in six weeks. Analysts had been expecting an increase. Supplies decreased 1.3 million barrels to 338.6 million barrels thanks to increasing refining capacity and lower imports. Still, crude stocks remain 9% above last year. In February and March, refiners typically shut some units down for seasonal maintenance as they retool to make cleaner, summer-blended gasoline. Their maintenance schedule this year has been longer than usual because refiners have to produce gasoline that can be blended with ethanol by May 31. Crude, which is processed into heating oil and gasoline, builds up because refiners are operating at lower capacity. Prices could rise even further as refineries undergo routine maintenance. Exxon Mobil ( XOM) has closed some units at its Baton Rouge, La., refinery, which processes 488,000 barrels a day, and will shut down others at its Baytown, Texas, operation in May. The Texas refinery processes 564,000 barrels a day, making it the largest in the U.S. Attacks on Nigerian pipelines and an ongoing standoff with Iran over its nuclear ambitions have kept oil prices high and offset large inventories. Daily oil production in Nigeria is down 26% to 1.6 million barrels per day thanks to rebel attacks. On Thursday, Italian oil company Eni ( E) said it could not honor its commitments from its Brass River terminal, which loads 200,000 barrels a day, because of a pipeline attack last week. The pipeline carries 75,000 barrels a day.
The U.N. Security Council is still discussing what measures to take against Iran, if any. Tehran restarted uranium enrichment after a two-year hiatus and has refused to back down. The West has threatened OPEC's second-largest crude producer with economic sanctions, an unlikely prospect because such a move would hike crude prices and lower razor-thin supply margins. Iran pumps 4.4 million barrels of crude a day. The Security Council is expected to release a statement regarding Iran in the next few days. Unleaded gasoline added 1 cent to close at $1.82 a gallon on concerns that rising demand may draw down supplies before the peak summer driving season. Gasoline stocks dropped by 2.3 million barrels last week to 221.6 million barrels. Although inventories are 1% above last year, traders are concerned the surplus could quickly be erased. Prices have been volatile thanks to a phase-out of MTBE, or methyl tertiary butyl ether, an additive linked to water pollution, by May 31. Gasoline prices are up 5% since January. Refiners will have to produce gasoline that can be blended with ethanol, though some analysts have said there won't be enough to meet demand and could lead to even higher gasoline prices. Heating oil inched up 1 cent to finish the trading day at $1.79 a gallon. A surplus of natural gas in storage outweighed cold weather predictions and drove down natural gas prices by 3 cents to a close of $7.29 per million British thermal units. A warmer-than-average winter has boosted supplies 39% over last year and 67% above the five-year average. Natural gas has fallen more than 50% since December, when it touched $15 per million British thermal units. "Demand has eroded so much that pre-winter expectations of a North American natural gas shortage have turned into a gas supply bubble in recent weeks," said Bart Melek, a senior economist with BMO Nesbitt Burns, an investment bank in Toronto.
This winter has been one of the five mildest on record, the National Weather Service said. The average temperature in January, the warmest on record, was 39.5 degrees Fahrenheit, which is 8.5 degrees warmer than usual. Although a wintry chill is projected to envelop the Northeast and Ohio Valley through next week, it will likely be replaced with warmer weather, AccuWeather.com, a State College, Pa., weather forecaster said Friday. The rest of the country will enjoy warmer temperatures on the first weekend of spring. Rising crude prices pulled up energy shares on Friday. ConocoPhillips ( COP) and Marathon Oil ( MRO) were still climbing a day after the Prudential Equity Group raised the companies' ratings. Conoco shares added 64 cents to $61.76, while Marathon moved up 7 cents to $77.18.