Oil rises as warships enter Gulf
Two U.S. aircraft carriers plan on sailing close to Iran after report says country ramps up nuclear program; U.S. gasoline supplies rise.
By Steve Hargreaves, CNNMoney.com staff writer
May 23 2007: 11:43 AM EDT
NEW YORK (CNNMoney.com) -- Oil prices rose Wednesday as U.S. naval action off the Iranian coast outweighed a domestic inventory report showing a large build in gasoline supplies and higher refinery activity.
U.S. light crude for July delivery rose 44 cents to $65.95 a barrel on the New York Mercantile Exchange.
Reuters said nine U.S. warships carrying 17,000 personnel entered the Persian Gulf Wednesday following an International Atomic Energy Agency report saying Iran has not only failed to halt its uranium enrichment program, but accelerated it.
Navy officials told Reuters it was the largest daytime assembly of ships since the 2003 Iraq war.
They added Iran had not been notified of plans to sail the ships, which include two aircraft carriers, through the Strait of Hormuz, a narrow channel in international waters off Iran's coast and a major artery for global oil shipments.
"The U.S. Navy is sending two aircraft carriers into the Gulf for training maneuvers, on the day of the IAEA Iranian report," Olivier Jakob, an analyst at Petromatrix, told the news agency.
"We are still of the opinion that this is more a symbolic show of force than anything else."
Iran is the world's fourth largest producer and exporter of crude oil.
The country has been locked in an ongoing disputer with the West over its nuclear program, which it says is intended for peaceful power generation but the U.S. and several European countries suspect is intended to produce a weapon.
The Iranian news appeared to overshadow a report in the U.S. showing higher gasoline and crude oil supplies, as well as increased refinery activity. Oil prices dipped briefly following its release at 10:30 a.m. ET.
In its weekly inventory report, the Energy Information Administration said gasoline supplies, closely watched as the summer driving season gets underway and running low all year, rose by 1.5 million barrels. Analysts were looking for a gain of 1.4 million barrels, according to Reuters.
Refineries ran at 91.1 percent capacity, up about 1.6 percent from last week, more than expected.
Reformulated gasoline futures for July delivery fell slightly on NYMEX.
Most analysts blame the recent spike in gasoline prices on refinery problems.
A spate of fires, power outages, maintenance and other problems have kept refinery capacity running below 90 percent for several weeks, well below normal. That has resulted in low gasoline supplies and even prompted talk of a shortage this summer.
Retail gasoline prices passed the all time high, even adjusted for inflation, earlier this week and now average $3.22 a gallon, according to the motorist organization AAA.
Crude stocks rose by 2 million barrels. Analysts were looking for a gain of 600,000 barrels.
Distillates, used to make heating oil and diesel fuel, increased by 500,000 barrels. Analysts were looking for a gain of 1.2 million barrels.