Oil Is Little Changed Above $145 on Concerns Over Fuel Supplies

By Margot Habiby and Robert Tuttle
July 4 (Bloomberg) -- Crude oil was little changed above $145 a barrel after reaching a record yesterday amid signs demand for fuels, particularly from China, may strain supplies.

PetroChina Co. may import record volumes of petroleum products this year to meet demand needed for reconstruction after May's earthquake, China National Petroleum Corp. said June 28, and before the Olympics next month. Heating oil futures, a proxy for distillate fuels including diesel, reached an all-time high yesterday.

``There's a kind of expectation in the market that there will be strong ongoing demand for distillate fuel,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York. ``We had the Chinese earthquake, and we've got the Olympics coming up.''

Crude oil for August delivery rose 15 cents to $145.44 a barrel at 8:55 a.m. in Sydney in after-hours electronic trading on the New York Mercantile Exchange. Yesterday, oil rose $1.72, or 1.2 percent, to settle at $145.29 a barrel. Futures earlier touched $145.85, the highest since trading began in 1983.

While U.S. financial markets are closed today for the Independence Day holiday, Nymex electronic trading continues.

The May 12 earthquake in China's Sichuan Province, the country's most powerful in 58 years, killed more than 69,000 people. The Olympic Games will be held Aug. 8-24 in Beijing.

Heating oil for August delivery rose 3.45 cents, or 0.9 percent, to $4.106 a gallon on the exchange yesterday. Earlier, it climbed 1.6 percent to a record $4.135 a gallon.

Job Cuts

Concern that economic growth may be slowing damped crude oil's gain earlier.

U.S. employers cut jobs for a sixth straight month and service industries shrank in June, signaling that the slowdown may deepen as the impact of federal tax rebates fades.

``You've got the economic reality that the U.S. economy stinks, demand for oil stinks,'' said David Pursell, managing partner at Tudor Pickering Hold Co. in Houston.

The euro fell the most against the dollar in more than two months after European Central Bank President Jean-Claude Trichet indicated he may not boost interest rates again. The ECB raised its benchmark lending rate to 4.25 percent yesterday.

The euro dropped 1.1 percent to $1.5703 yesterday in New York, from $1.5882 on July 2. The dollar appreciated 0.8 percent to 106.73 yen, from 105.91.

Declines in the dollar were one of the factors responsible for a 48 percent increase in oil futures prices in the first half of the year.

Stock Markets

Earlier yesterday, oil reached a record because of buying from investors seeking an alternative to tumbling stock markets and amid concern a conflict with Iran over its nuclear program would cut Persian Gulf supplies.

Ali Akbar Velayati, adviser to Iran's supreme leader, said his comments earlier this week that Iran must consider talks over its nuclear program didn't mean his country would accept Western incentives to abandon uranium enrichment, Agence France- Presse said. Iran is the Organization of Petroleum Exporting Countries' second-largest oil producer.

Nearly all of oil's ``last $10 move is based on the potential for an Israeli-Iranian conflict,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston.

Oil prices are being led higher by factors including geopolitics, the weakening dollar and concern about future supplies, Saudi Arabia's Oil Minister Ali al-Naimi said in Madrid yesterday, where he is attending the World Petroleum Congress.

Brent crude oil for August settlement rose $1.82, or 1.3 percent, to $146.08 a barrel on London's ICE Futures Europe exchange yesterday. Futures earlier climbed to $146.69, the highest intraday price since trading began in 1988.

Tropical Storm Bertha, the second named storm of the Atlantic hurricane season, has formed in the far eastern Atlantic Ocean, near the Cape Verde Islands, according to the U.S. National Hurricane Center. The storm, with maximum sustained winds of near 40 miles (65 kilometers) an hour, was moving to the west-northwest at about 14 mph.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Robert Tuttle in New York at rtuttle@bloomberg.net