Oil Up on Refinery Expectations

VIENNA, Austria - Benchmark oil prices moved up Tuesday as market participants eyed the midweek release of U.S. government data expected to show domestic refinery utilization rising for the sixth straight week.

Along with expectations of increased crude needs by refineries, renewed unrest in southern Nigeria accounted for the upward trend. Reports that gunmen abducted a Pakistani construction worker refocused concerns about the oil-rich country.

Over 150 foreigners have been seized in the Niger Delta this year alone. Analysts say that the payment of large cash ransoms and lack of arrests encourages the trend.

Still, forecasts of healthy oil and gasoline stockpiles kept prices in check.

Light, sweet crude for September delivery gained 48 cents to $77.31 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe.

The contract lost 19 cents to settle at $76.83 a barrel Monday. It rose more than $2 Friday to $77.02, a cent shy of the July 2006 record close for a front-month contract. The contract hit an 11-month intraday high of $77.33 Monday in a short-lived rally analysts said was fueled by technical buying.

September Brent crude gained 52 cents to $76.26 a barrel on the ICE futures exchange in London.

U.S. Energy Information Administration data due Wednesday is expected to show U.S. refinery utilization increased last week, with an accompanying rise in petroleum product inventories and a decline in crude stocks, according to a Dow Jones Newswires survey of energy analysts.

Refinery runs are expected to have risen an average of 0.7 percentage points to 92.4 percent of operating capacity. Analysts expect crude oil stocks to have fallen 690,000 barrels with the increased refinery use.

Still, Vienna's PVM Oil Associates noted that "even with such a decline, U.S. crude stocks would remain some 43 million barrels above the five-year average and around 17 million barrels higher than seen in the same week last year."

Meanwhile, gasoline stocks are expected to have increased 1.1 million barrels, and distillate stocks, which include heating oil and diesel fuel, are predicted to have risen 1.4 million barrels.

Investors are also closely watching OPEC, whose officials have been giving mixed signals about whether the cartel will decide during a September meeting to boost production. Some Organization of Petroleum Exporting Countries officials have recently suggested oil is priced too high, and others have stated that there is no reason to boost production.

OPEC Secretary General Abdalla Salem el-Badri said the group would be uncomfortable if oil prices rose above $80 a barrel or fell below $50. OPEC would move to alleviate any supply concerns if it saw hard evidence, he said.

"There is no official price band, but I think I can safely say we would not feel comfortable if the oil price sank to $50 a barrel," el-Badri said in an interview with Austrian financial daily Wirtschaftsblatt published Monday. "A price above $80 also wouldn't make us particularly pleased."

Nymex gasoline prices were up slightly at $2.0895 a gallon (3.8 liters), and heating oil futures rose by more than a penny to $2.0757 a gallon. Natural gas futures gained 16.6 cents to $6.665 per 1,000 cubic feet.

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Associated Press writer Gillian Wong contributed to this report from Singapore.