Oil closed above $69 a barrel, a nine-month high, and gasoline futures also rose Monday after Nigerian oil unions called a strike for this week.
Retail gas prices, meanwhile, continued their decline despite analyst predictions Friday that they would fall no further.
Nigerian oil unions called a general nationwide strike to begin Wednesday in protest of a government price hike on automobile fuel. Also supporting energy prices were attacks on two Nigerian oil facilities by angry villagers and gunmen, which cut oil output.
“You've got kind of a double-whammy out of Nigeria,” said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.
Nigeria was the third-biggest exporter of oil to the U.S. in March, behind Canada and Mexico, with an average of 1.35 million barrels a day, according to Energy Department statistics.
Light, sweet crude for July delivery rose $1.09 to settle at $69.09 a barrel on the New York Mercantile Exchange. The front-month contract last closed above $69 on Sept. 1.
Gas futures for July rose 0.42 cent to settle at $2.2643 a gallon on the Nymex. At the pump, gas prices fell 0.3 cent overnight to a national average of $3.005 a gallon, according to AAA and the Oil Price Information Service. Retail gasoline has fallen 22.2 cents from its late May peak.
Brent crude for August delivery added 71 cents to settle at $72.18 a barrel on the ICE futures exchange in London.
Stocks of major airlines fell on the news of higher oil prices, sending the Dow Jones transportation average down 41.23, or 0.80 percent, to 5,135.75.
In other Nymex trading, heating oil futures rose 2.36 cents to settle at $2.0342 a gallon, while natural gas prices fell 22.8 cents to settle at $7.69 per 1,000 cubic feet.
Analysts said the news out of Nigeria was prompting large funds to buy energy futures, driving prices higher. But analysts are skeptical that the unions will follow through and actually strike.
“These Nigerian labor unions threaten to go on strike all the time, and then settle at the last minute,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
“It's a very common thing,” said Saville. “They'll threaten strikes pretty frequently.”
But investors have little other news to trade on, Saville said.
“Other than the news in Nigeria, you've still got this … gasoline situation and, specifically, what the refinery utilization numbers are going to be,” Saville said.
Energy futures rallied late last week after a Wednesday report by the Energy Department's Energy Information Administration showed gasoline inventories were unchanged at 201.5 million barrels for the week ended June 8. Analysts surveyed by Dow Jones Newswires expected inventories to rise by 2 million barrels.
The report also showed that refinery utilization fell by 0.4 percent, to 89.2 percent, when analysts had expected an 0.8 percent increase.
“Here we are in June, and refinery capacity is at least 4, 4 1/2 points below where it should be,” said John Person, an independent energy trader and president of NationalFutures.com.
The data surprised energy traders and attracted hedge fund buying, driving oil prices to Friday's nine-month high. If Nigeria's unions do follow through on their strike threat, however, the market's bullish run last week will look minor, Flynn said.
“If they do go on strike, it's probably enough to drive (oil) prices to the mid-$70's,” he said.
Also supporting prices was news of a possible work stoppage in Brazil, where oil workers could strike early next month, Saville said, and developments in the Palestinian territories. Palestinian President Mahmoud Abbas swore in an emergency Cabinet and outlawed the militia forces of Hamas after Hamas took control of Gaza.
Geopolitical developments support oil prices, because traders are wary of anything that could affect oil supplies, analysts said.
“The oil market is focusing again on supply and geopolitical tensions and these factors are likely to lead to higher prices in the near term,” said Peter Fertig, an analyst at investment bank Dresdner Kleinwort.
But domestic supply issues remain paramount in the minds of most energy traders. Traders are awaiting Wednesday's EIA inventory report with great anticipation. This spring has seen an unusual number of refinery outages, causing analysts to worry refiners aren't producing enough gas to meet peak summer driving demand.
Yet another facility, the Big West refinery in Bakersfield, Calif., reported the shutdown of key gas-producing equipment on Friday, analysts said. On the other hand, there was scattered news of refineries returning to service, including reports that Exxon Mobil Corp. and Valero Energy Corp. were restarting equipment at refineries after maintenance or unplanned shutdowns.
“We've got to get that utilization rate up to 93 (percent), 94 percent,” Saville said. If production doesn't increase, he said, “we'd better hold our breath and hope we don't get a hurricane.”
