Wednesday, May 7, 2008

Oil Trades Near Record on Signs U.S. Economy May Spur Demand

By Christian Schmollinger

May 8 (Bloomberg) -- Crude oil was little changed near a record in New York on signs the U.S. economy was improving, spurring energy demand at a time when refineries are producing less fuel ahead of the peak summer demand season.

Worker productivity climbed at a higher rate in the first quarter than the previous three months, the Labor Department said yesterday. Domestic refineries operated at 85 percent last week, down from 89 percent at the same time last year, the Energy Department said yesterday. Oil jumped to a record $123.93 a barrel yesterday.

``People are surprised at the strength of the U.S. economy,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore. ``They are more focused on the idea that we may have more demand than we expected. And that's going to be a big problem with the refinery runs being as soft as they are for this time of year.''

Crude oil for June delivery was at $123.56 a barrel, up 3 cents, at 9:37 a.m. in Singapore in after-hours trading on the New York Mercantile Exchange. Yesterday, futures rose $1.69, or 1.4 percent, to settle at $123.53 a barrel, the highest close since trading began in 1983.

Oil declined as low as $120.54 a barrel yesterday after an Energy Department report showed that crude supplies in the world's largest oil consumer rose more than forecast last week.

Supplies surged 5.65 million barrels, or 1.8 percent, to 325.6 million barrels last week, amid increased crude imports, an Energy Department report showed yesterday. Analysts in a Bloomberg News survey had forecast a gain of 1.63 million barrels. Gasoline inventories also rose.

Brent crude oil for June settlement was at $122.56 a barrel, up 24 cents, on London's ICE Futures Europe exchange at 8:46 a.m. Singapore time. The contract yesterday climbed $2.01, or 1.7 percent, to $122.32 a barrel. The contract touched $122.70 a barrel, a record intraday price.

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