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Oil Rebounds After Big 2-day Drop, Rising About $2

NEW YORK - Oil prices rebounded Thursday, gaining more than $2 at times as traders questioned whether this week's two-day plunge signals a real turnaround or just a breather for the bulls.

Light, sweet crude for August delivery was up $1.51 cents at $136.11 a barrel less than an hour after floor trading opened on the New York Mercantile Exchange. The contract earlier rose as high as $136.75 and dipped as low as $133.02.

Oil prices fell more than $10 over the previous two days on growing concerns that inflation and other economic concerns could reduce demand for crude.

A surprisingly large gain in oil and refined fuel inventories in the U.S. on Wednesday prolonged the sell-off, because it suggested more supplies were heading into storage rather than consumers' fuel tanks.

Reports of a pre-dawn explosion that damaged an oil pipeline in Nigeria's restive south dragged supply concerns back into the oil market, while renewed weakness in the dollar enticed fresh buyers to bet on crude.

Many investors buy commodities such as oil as a hedge against inflation when the dollar weakens. Also, a weaker dollar makes oil cheaper to investors dealing in other currencies, such as the euro.

A Nigerian military official said the blast on a pipeline owned by Agip, a subsidiary of the Italian energy giant Eni SpA, "affected output," although he did not say by how much.

Col. Chris Musa, head of the Bayelsa State military, also did not say how severe the damage was, and declined to comment on what might have caused the explosion or whether it had resulted in any casualties.

Security contractors familiar with the blast said the pipeline normally carries about 45,000 barrels a day. They spoke on condition of anonymity because they were not authorized to speak to the media.

Attacks on oil industry infrastructure in the past two years have slashed oil output by almost a quarter in Nigeria, Africa's top crude producer.

At the gas pump, prices held steady at a record $4.114 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel rose to a new record of $4.845, up more than half a penny.

In other Nymex trade, heating oil rose almost 5 cents to $3.8906 a gallon, while gasoline futures gained nearly 5 cents to $3.328. Natural gas futures fell 39.4 cents to $11.004 per 1,000 cubic feet.

Brent crude for September delivery rose $1.67 to $137.48 on the ICE Futures Exchange in London.




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