Oil edged back toward $137 a barrel on Thursday in Asia amid lingering concerns over Iran's nuclear conflict and reports of lower-than-expected US oil stockpiles.
"The bull run is really not over yet. The Iranian nuclear situation remains fluid and the market faces supply-side risks with global demand outpacing supply," said Victor Shum, an oil analyst with Purvin & Gertz in Singapore.
"It remains likely that pricing will gain strength and rise to a new peak in the coming weeks," he said.
Midday in Singapore, light, sweet crude for August delivery was up 42 cents at $136.42 in electronic trading on the New York Mercantile Exchange.
The contract seesawed on Wednesday in the floor session before settling a penny higher at $136.05, ending two days of sharp declines that left prices 6.4 per cent below last week's record high. Figures from the Energy Information Administration showed US oil supplies fell 5.9 million barrels, or 2 percents, last week. That is greater than the drop of 1.9 million barrels forecast by analysts surveyed by the energy research firm Platts. Prices often rise in response to large drops in US oil supplies. But gains were tempered because much of the inventory decline was on the West Coast and not representative of overall supplies, said Jim Ritterbusch of energy consultancy Ritterbusch and Associates.
In addition, gasoline stockpiles rose more than expected, partly offsetting the decline in crude. Inventories of distillate fuel, which include diesel and heating oil, also rose, but less than analysts anticipated.
In Washington on Wednesday, House Speaker Nancy Pelosi called on President George W Bush to open up the country's Strategic Petroleum Reserve to help stabilise oil prices. Bush has repeatedly rejected calls to use oil from the emergency government stockpile. "Releasing some oil reserves may improve sentiment but the impact on pricing will be small. It's unlikely to happen because there is no emergency, no oil shortage," Shum said. Reports that Iran's elite Revolutionary Guards fired missiles during war games sent oil prices shooting as high as $138.38 on Wednesday. Iranian officials said the exercise was to show that the key oil producer can retaliate against a US or Israeli attack. The barrage was said to include a new version of the Shahab-3 missile, which officials have said has a range of 1,250 miles. That makes it capable of striking Israel, Turkey, the Arabian peninsula, Afghanistan and Pakistan.
Iran is the world's fourth-largest oil producer and OPEC's second-largest exporter. Oil traders fear any military conflict could prompt Iran to block the Strait of Hormuz, a passageway that handles about 40 per cent of the world's tanker traffic. In other Nymex trading, heating oil futures rose 1.25 cents to $3.8641 a gallon while gasoline futures rose 0.082 cent to U$3.389 a gallon. Natural gas futures dropped 1 cent to $11.996 per 1,000 cubic feet.
August Brent crude rose 57 cents to $137.15 a barrel on the ICE Futures exchange in London.