VIENNA - Crude oil futures jumped back above $54 a barrel Friday, following a brief cool-down in prices after a U.S. government report showed swelling stockpiles in crude and other fuels.
Analysts noted different pulls on the market, with worldwide appetite for diesel and heating oil tending to eclipse the effect of the healthy build in supplies reflected by the latest U.S. Energy Department report.
Light, sweet crude for July delivery was up 47 cents to $54.10 a barrel on the New York Mercantile Exchange by afternoon in Europe. It had settled at $53.63 per barrel Thursday after rallying to $55.40 a barrel early in the session.
Heating oil traded at $1.548 a gallon while unleaded gas rose to $1.523 - both up less than a penny.
In London, Brent crude was fetching $53.05 on the International Petroleum Exchange, up 65 cents.
The U.S. Energy Department said Thursday inventories of crude oil rose last week by 1.4 million barrels to 333.8 million barrels, or 11 percent above last year, while gasoline inventories grew by 1.3 million barrels to 216.7 million barrels, up 6 percent from a year ago.
However, the report was tempered by the small rise in distillate supplies, by 700,000 barrels to 106.4 million barrels, or roughly equal to year-ago levels - adding to worries that there might not be enough heating oil and diesel output for the next winter season in the Northern Hemisphere.
In recent weeks, traders have been worried that increasing oil consumption - especially in the second half of the year - will make it difficult for producers to keep up, leaving the world vulnerable to any unexpected disruptions.
Global oil consumption traditionally peaks during the Northern Hemisphere winter on heating oil and jet fuel demand but the U.S. summer driving season and gasoline use have also played in supply fears.
"The market is making a mistake in assuming linkages between distillate prices and crude prices," said Hong Kong-based Morgan Stanley economist Andy Xie, adding that the healthy builds in crude inventories should bring prices down further.
"With higher inventory numbers and a substantial number of investors backing off in the summer, declining price levels to $40 is possible," he said.
But PVM Oil Associates in Vienna focused on possible tightness ahead for diesel and heating oil.
"The worry is that with refiners now set to focus on hiking their gasoline output, rebuilding distillates stocks ... will be put on the back burner," PVM said in its daily energy market report. "The key difference between the two as far as the U.S. market is concerned is that for gasoline, it can rely on Europe ... whereas for distillates it is in theory competing with Asia."
PVM named "China`s power shortage, sizzling air travel and strong kerosene requirement during the Northeast Asian winters as "key supporting factors" for strong distillate showings.
The Organization of Petroleum Exporting Countries meets June 15. Analysts believe the 11-member group will not reduce its current output of 30 million barrels daily.
On Wednesday, OPEC President Sheik Ahmed Fahd Al Ahmed al-Sabah said the group would maintain its current production ceiling until the third quarter of 2005.