NEW YORK -- Crude oil futures rallied back above $53 late yesterday on speculation and panic sparked by an oil line explosion in Mexico.
Traders were also nervously monitoring developments in Nigeria's national strike and recovery efforts in the Gulf of Mexico.
Crude for November delivery surged $1.13 to settle at $53.64 per barrel on the New York Mercantile Exchange, after falling as low as $51.49 in morning trading. On Tuesday, light, sweet crude settled at $52.51 after hitting an all-time high of $54.45.
A 30-inch oil line exploded in eastern Mexico yesterday morning, according to local officials. Enrique Fonseca, chief of the communication center of the Veracruz state civil defense agency, said workers from the government oil company, Petroleos Mexicanos, had closed off the line and were working to contain the spilled oil.
The news was enough to set off buying in a jittery market atmosphere, said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
"It looked as if we were starting a corrective phase in the market," Silliere said. "But you don't expect a correction to last one day. . . . That's not normal."
Rising prices have been driven by tight supplies. The American Petroleum Institute reported yesterday that US oil production fell 15 percent in September to the lowest monthly level in more than half a century, led by sharp declines in output from Alaska and the hurricane-hit Gulf of Mexico region.
In the same month, the API said, total US demand grew 3 percent compared to a year ago. Many market observers say prices are likely to continue to skyrocket because of continuing supply concerns. Adding to supply concerns, the Royal Dutch/Shell Group said its Nigerian output would be cut by 20,000 barrels a day because of a ruptured pipeline. While officials tried to investigate, saboteurs set the pipeline on fire.
The production cuts come in the middle of national strike and a fragile peace deal between rebels and the government for control over the oil-rich Niger Delta that churns out 2.5 million barrels of crude daily.