Saudi Official Says Pipeline Explosion Report Is False

Oil surged nearly 5 percent on Thursday to its highest level since crude's record run in 2008 after a late report out of Iran of a pipeline fire in top exporter Saudi Arabia.

Iranian media reported an explosion on an unknown oil pipeline in the oil-rich Eastern Province of Saudi Arabia, although it was not possible to verify the report immediately.

Prices edged off highs after Dow Jones newswires reported a Saudi oil official said the report was untrue, according to CNBC television.

Markets have been on edge this year as threats of a supply disruption due to the West's standoff with Tehran over Iran's nuclear program have added to concerns about actual production losses from South Sudan, Yemen, Syria and the North Sea.

"The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

U.S. light, sweet crude [CLCV1  Loading...      ()   ] settled at $108.84 a barrel, up $1.77, before rising to $110.55 in late activity, the highest since May 2011.

Iran, the world's fifth largest oil producer, has been struggling to sell its crude in the face of tightening U.S. sanctions and an EU embargo that kicks in on July 1. This has threatened to tighten global crude supplies.

However, U.S. Energy Secretary Steven Chu said that global oil producers have enough spare production capacity to make up for a drop in Iranian exports.

Brent crude futures [LCOCV1  Loading...      ()   ] prices topped $128 a barrel in late post-settlement trade, levels not reached since July 2008 when the growing economic crisis sent oil spiraling to record peaks of more than $147 a barrel.

Prices were already up before the pipeline report, lifted by news Israel would test-fire a ballistic interceptor missile, escalating tensions over the crisis that has included tough sanctions against Iran.

International benchmark Brent crude climbed to $128.40 a barrel in post-settlement trade, after settling at $126.20, up $3.54 on the day.

U.S. President Barack Obama said his administration will lay out as "many steps as we can" in coming weeks to unclog bottlenecks in the world's top consumer that are helping to push up the price of gasoline and other fuels, a key issue for consumers as the economy struggles to recovery in an election year.

Data showing U.S. jobless claims fell last week — the latest sign that the labor market recovery was gaining momentum — also helped support prices.

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Saudi Oil Boost Could Calm Markets: Schumer

WASHINGTON - The United States should do more to encourage Saudi Arabia to boost its oil production to make up for lost Iranian oil, Senator Charles Schumer said on Sunday, urging renewed diplomacy as a way to ease the run-up in oil prices.

Tensions surrounding Iran's nuclear program have pushed oil prices to nine-month highs, and U.S. gasoline prices have surged, becoming a top political issue in the run-up to the 2012 presidential elections.

A public promise from Saudi Arabia, the world's top oil exporter, to pump oil at its full capacity would calm oil markets as well as gasoline prices, Schumer, the third-ranking Democrat in the Senate, said in a letter to Secretary of State Hillary Clinton.

In the letter, which was obtained by Reuters, Schumer asked Clinton to urge the Saudi government to increase production to full capacity of 12.5 million barrels per day - an increase of 2.5 million barrels.

That would compensate for a reduction in Iran's total exports of 2.2 million barrels per day. Oil sales from Iran, the third-largest oil exporter, face tough new sanctions as a result of the standoff over its nuclear development.

Gasoline prices in the United States are the highest on record for February. The American Automobile Association (AAA) said the national average price hit $3.65 per gallon on Friday, and analysts say average prices could rise well over $4 per gallon during the peak driving season in coming months.

"These skyrocketing fuel prices are directly linked to the global energy market, particularly Iran's recent efforts to manipulate oil prices and the worry of impacts on supply from an escalation of regional hostilities," Schumer said in the letter.

The United Nation's nuclear watchdog last week warned Iran has stepped up its efforts to enrich uranium. Iran has insisted it is developing nuclear power, not weapons.

The European Union will ban Iranian oil as of July 1, and other buyers will face new U.S. sanctions unless they cut back on purchases.

"These market shifts are now hitting Americans at the pump, reverberating throughout the rest of our economy, and threatening our recovery," Schumer said.

Saudi Arabia has privately reassured customers it will pump more oil, and sharply increased exports in the past week, although it was not clear whether the jump would be sustained.

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