Oil prices rose Thursday, lifted by a rally in heating oil futures amid a supply scramble caused by a labor strike in France.
Heating oil futures rallied on both sides of the Atlantic on news that a strike at five of six Total SA refineries has cut into the French oil company's production of gasoline and other refined products.
On London's International Petroleum Exchange, gasoil futures for June delivery jumped $14 to $445.50 a metric ton. That rally spilled over to lift the price of heating oil futures in the U.S.,
where heating oil for June delivery soared 4.58 cents to $1.4035 a gallon on the New York Mercantile Exchange.
Diesel in both the U.S. and Europe is priced off heating oil futures. Gasoline for June delivery on the Nymex rose 2.46 cents to $1.4390 a gallon. Benchmark light, sweet crude oil futures for June delivery on the Nymex rose 55 cents to $47.80 a barrel.
Workers began to strike Monday to protest against the government's annulment of the Pentecost holiday and Total's refusal to pay day-off compensation for the day. With its six refineries, Total holds over half of France's refining capacity. Charles Foulard, a union official, said the strike had reduced Total's French production to only a quarter of its normal daily output.
European supplies of diesel and heating oil -- a class of fuels known as distillates -- have been tight in recent months, leaving the continental market susceptible to price spikes. With the European driving season getting underway, diesel demand from the continent's increasingly diesel-dependent cars is on the rise.
"This is reflecting an overall tightness in distillate stocks in Europe and the U.S.," said Ed Silliere, an analyst at Energy Merchant Intermarket Futures in New York. "This strike may not last long, but it doesn't have to have a significant impact on prices."
The French strike is boosting U.S. prices because European distillate supplies have been tight in recent months, forcing continental refineries and distributors to import it from the U.S. The U.S. has also been sending small quantities of distillate fuels to South America, which also relies on European refineries for imports.
U.S. heating oil futures have held up relatively well in recent weeks even as crude and gasoline futures have tumbled from their record levels amid rising inventories. That's because U.S. distillate stocks, running at a deficit throughout the heating season, only recently began to rise
modestly. With diesel demand in the U.S. running strong, analysts expect prices to remain relatively high for the foreseeable future, even if crude futures continue to decline.
Nigeria Calls on OPEC to Cut Production
Nigeria's presidential advisor for energy affairs, Edmund Daukoru, has called on the Organization of Petroleum Exporting Countries to cut back overproduction in order to prevent oil prices from crashing.
"This [price] dip is a signal that members should cut their overproduction. I am calling for better compliance amongst all members" of OPEC, Mr. Daukoru said. "We will meet in a month and then OPEC needs to look closely at stocks and what surplus there is in the market."
Mr. Daukoru's remarks follow comments from fellow OPEC members Kuwait, Qatar and Iran Thursday, warning that oil prices could collapse as U.S. oil inventories are building quickly. "The stock issue is very sensitive," Sheikh Ahmad Fahad al Sabah, who is also Kuwait's oil minister said, after holding talks with his counterpart from Qatar, Abdullah bin Hamed al Attiyah. "The price can drop if OPEC doesn't take a specific decision."
--Sally Jones