Fears Drive Oil Back Above $55

Oil jumped back above $55 a barrel Friday as traders said sustained demand and refinery outages could strain U.S. gasoline supplies during the peak summer traveling season.

A spate of violence in the Middle East also revived what dealers call a “terror premium,” an amount added by the marketplace to the price of oil to reflect fears of potential attacks on energy infrastructure in the oil-rich region.

U.S. light crude rose $1.19, or 2.2%, to $55.39 a barrel, extending to four days a rally that has added more than $4 to prices. Oil is 25% above levels recorded at the end of 2004 and nearing the all-time peak of $58.28 reached this month.

A hefty surplus in U.S. crude oil inventories and signs that the Organization of the Petroleum Exporting Countries is boosting output again have done little to calm markets worried about insufficient transport and heating fuels to meet demand later this year.

Dealers are increasingly anxious about oil product supplies, particularly in the United States, where a series of refinery glitches has raised fears that plants -- already operating near capacity -- may struggle to sate rising demand.

U.S. gasoline futures climbed 3.23 cents to $1.653 a gallon.

Experts said there was also concern over flaring violence in oil-rich countries of the Middle East.

Two suspected militants and two Saudi security personnel were killed in a fierce gunfight Thursday in the Muslim holy city of Mecca, the Interior Ministry said.

“There is concern that some terror premium is creeping into prices after the Mecca incident on Thursday and the continuing violence in Iraq,” said Phil Flynn, an analyst at Alaron Trading. “For this reason, nobody wants to go home short” at the start of the weekend, he added.

Traders said a gasoline-making unit at a ConocoPhillips refinery in Louisiana would be down for one more week after failing to restart following maintenance, adding to a spate of problems in Texas, Louisiana and Kansas.