NEW YORK -- Oil prices rose above $70 a barrel yesterday, as persistently high fuel demand and concerns about possible supply disruptions in the Middle East and Nigeria offset news of increasing US inventories.
The higher finish came after prices had traded lower for most of the day.
Today marks the UN deadline for Iran, OPEC's number four producer, to halt its nuclear program. If it doesn't comply, any UN sanctions could provoke the country to retaliate by blocking exports.
Meanwhile, a possible strike by oil workers looms in Nigeria, the fifth-largest supplier of oil to the United States.
Light sweet crude for October delivery rose 32 cents to settle at $70.03 a barrel on the New York Mercantile Exchange after trading as low as $68.65 earlier in the day -- almost $10 below the record high of $78.40 a barrel reached July 14.
Yesterday's rise in crude futures ended two days of sharp drops that brought them roughly 10 percent below their level of three weeks ago.
``Unless there's a major sea change in market, or unless you believe the economy is going to collapse, you've got to believe the correction is over," said Alaron Trading Corp. analyst Phil Flynn.
Gasoline futures rose 1.58 cents to $1.805 a gallon. Heating oil futures rose 0.64 cent to $1.9496 a gallon.
Brent crude on London's ICE futures exchange rose 32 cents to settle at $70.18 a barrel.
US crude inventories rose 2.4 million barrels to 332.8 million barrels in the week ended Aug. 25, or 6.2 percent above year-ago levels, the EIA said yesterday. Gasoline inventories rose 400,000 barrels to 206.2 million barrels, or 4.6 percent above last year's levels.
Distillate fuels rose 1.3 million barrels to 136.8 million barrels, with just 300,000 barrels of the rise attributable to heating oil. Distillate inventories are slightly below where they were last year.
The main reason crude inventories rose so much last week was because of surging imports, not increased domestic production.
``The question is: Is that going to continue? More than likely, it'll be a short-term phenomenon," Flynn said, noting those import levels are difficult to maintain.
Furthermore, US demand for gasoline, diesel, and heating oil is still going strong, as is jet fuel demand -- up 2.8 percent over the last four weeks from last year, despite a thwarted terror attempt at a London airport that some traders thought might deter travelers.