May 25, 2007 / 1:36 AM / in 10 years

U.S. crude jumps $1 on gasoline worries

NEW YORK (Reuters) - U.S. crude oil prices rose a dollar Friday on concerns over low gasoline supplies heading into the travel-heavy Memorial holiday weekend.

<p>An oil rig in a file photo. Oil rose to $71 a barrel on Friday, near a nine-month high, as a strike in Nigeria threatened more of the country's output and Iran remained defiant over its nuclear programme. REUTERS/File</p>

Rising tension surrounding Iran and Nigeria, two of the world’s leading oil producers, was also underpinning gains, dealers said.

U.S. crude futures CLc1 settled up $1.02 to $65.20 a barrel. London Brent LCOc1, widely seen as a more accurate benchmark for global crude prices, was down 3 cents to $70.69 a barrel.

The jump in U.S. oil prices came on the eve of the Memorial Day holiday, the traditional start of the summer vacation season when U.S. gasoline demand typically peaks.

Some 32.1 million Americans are expected to travel 50 miles

or more by car during the Memorial Day holiday this weekend, up 1.8 percent from a year ago even as gasoline prices at the pumps skyrocket to a record $3.23 a gallon, according to an AAA survey.

Gasoline stockpiles in the world’s biggest energy consumer are running low, about 7 percent below a year ago, after prolonged refinery shutdowns since winter slashed domestic production.

“With the U.S. refining system so fragile and geopolitical tensions getting cranked up, I don’t think anyone will want to be too short going into the three-day weekend,” said Nauman Barakat, senior vice president at Macquarie Futures USA.

Several refineries were restarting this week, boosting fuel production levels, which dealers said could ease the fuel crunch. But they added the expected increase in refinery activity could strain crude stockpiles, the main feedstock in fuel production.

<p>U.S. warships enter the Gulf in a show of force off Iran's coast that navy officials said was the largest daytime assembly of ships since the 2003 Iraq war, May 22, 2007. REUTERS/U.S. Fifth Fleet/Handout</p>

GEOPOLITICAL TURMOIL

Adding support to oil prices, Nigerian oil unions pulled many staff from crude export terminals on the second day of a strike Friday, authorities said. So far, the strike has not interrupted shipments.

Meanwhile, gunmen kidnapped 10 oil workers from a ship off the coast, police said.

“In Nigeria, there’s still quite a lot of unknown possibilities and the strike seems to be continuing,” said Tony Machacek, a broker at Bache Financial. “That will keep the market fairly well-supported.”

Frequent militant attacks on oil installations in Nigeria have already shut about a quarter of oil production capacity from the world’s eighth-largest exporter, or about 695,000 barrels per day.

Meanwhile, concerns over Iran’s nuclear ambitions continued to simmer.

Thursday, Iran’s president, Mahmoud Ahmadinejad, again dismissed Western pressure to halt Tehran’s nuclear drive, saying the country’s nuclear work was nearing a “peak.”

U.S. President George W. Bush said Washington would work with European, Russian and Chinese leaders to impose a third, stronger round of U.N. Security Council sanctions against the OPEC member nation.

Members of the Organization of the Petroleum Exporting Countries have said the group does not plan to raise production to cap rising prices soon. OPEC, which accounts for more than a third of world oil exports, cut its output ceiling by 1.7 million bpd in two deals since last October.

Additional reporting by Janet McBride and Alex Lawler in London

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