Oil surged over $113 per barrel Tuesday on word of supply disruptions in Nigeria and Mexico and increasing fuel demand in China, Bloomberg News reported Tuesday.

Oil increased $1.90 to $113.66 per barrel Tuesday morning after Mexico, the third largest supplier of oil to the United States, shut its fourth export terminal Monday, while Eni SpA halted output in Nigeria, Bloomberg New reported. Meanwhile, China, which boasts world's fastest-growing major economy, said diesel oil imports increased 49% in March 2008.

The other major energy commodities also vaulted ahead on the news in early trading Tuesday. Heating oil jumped 3 cents to $3.25 per gallon, unleaded gasoline added 2 cents to $2.84 per gallon, and natural gas added about 14 cents to $10.20 per million BTUs.

Supply disruptions jolt market

Independent energy trader Jim Dietz told BloggingStocks Tuesday the supply disruptions in Mexico and Nigeria were negative datapoints the oil market did not need.

Oil idled in the $101 range Wednesday at mid-day after the U.S. Energy Information Administration announced that weekly crude oil inventories surged higher.

Oil gained 12 cents to $101.10 per barrel, off highs earlier in the session, after the EIA said weekly crude oil inventories increased 7.4 million barrels for the week ending March 28, 2008.

Crude oil inventories totaled 319.2 million barrels. Gasoline inventories declined 4.5 million barrels. Distillate stocks fell 1.6 million barrels.

Historically, oil inventories increase as the spring quarter approaches, the lowest oil use quarter in the United States.

Energy commodities mixed

The other major energy commodities were mixed on the news in early trading Wednesday. Heating oil fell about 1 cent to $2.98 per gallon, unleaded gasoline added 2 cents to $2.65 per gallon, and natural gas declined about 28 cents to $9.44 per million BTUs.

Oil prices fell to $106 Friday morning on word that oil flows from a southern pipeline hit by saboteurs had resumed, Bloomberg News reported.

Oil fell $1.50 to $106.08 per barrel in early trading Friday. The other major energy commodities also retreated on the news. Heating oil fell about 4 cents to $3.10 per gallon, unleaded gasoline declined about 2 cents to $2.70 per gallon, and natural gas rose fell 2 cents to $9.70 per million BTUs.

Iraqi oil flows through the country's southern pipeline system to the Basra export terminal returned to normal at about 10 p.m. local time Thursday, an oil official said, Bloomberg News reported Friday.

One of Iraq's two main oil export pipelines near the southern city of Basra was blown up by saboteurs on Thursday. The pipeline transports oil from the Zubair oil field to the Al-Faw storage facility, where it is exported.

Oil Analysis: Prior to the Iraq incident, oil had been corrected to the $100 range, on likely lower oil demand and gasoline consumption stemming from the U.S. economic slowdown, and from record-high gasoline prices. However, two incidents this week, the Iraq pipe attack and a below-consensus weekly U.S. oil inventory report, caused a sudden reversal and a $7 spike in oil prices. Assuming bearish fundamentals remain the same -- and there are no further disruptions to supply globally -- traders now expect oil to resume its downward track as the spring season progresses.

Oil prices briefly jumped above $107 Thursday morning on news that saboteurs had blown up a major Iraqi export pipeline, the Agence France-Presse reported.

Oil rose $1.26 to $107.16 per barrel in early trading Thursday, before moderating some, to about $106.50. The other major energy commodities also jumped on the news in early trading Wednesday. Heating oil rose about 5 cents to $3.09 per gallon, unleaded gasoline added 1 cent to $2.72 per gallon, and natural gas rose about 3 cents to $9.43 per million BTUs.

One of Iraq's two main oil export pipelines near the southern city of Basra was blown up by saboteurs on Thursday, Samir al-Maksusi, Southern Oil Company spokesman, told the AFP. The pipeline transports oil from the Zubair oil field to the Al-Faw storage facility, where it is exported.

Oil spikes

The Iraq incident marks the second consecutive day a bullish data point has pushed oil prices substantially higher, and underscores the skittish price qualities of the world's most vital commodity, according to independent energy trader Jim Dietz. Dietz said that heading into the week many traders had expected oil to continue to trend lower on sluggish demand for oil and oil products in the U.S., due to its economic slowdown.

Oil surged $3.36 to $104.58 Wednesday morning after the U.S. Energy Information Administration announced that weekly crude oil inventories remained unchanged and gasoline supplies declined.

Crude oil inventories were unchanged in the latest week, at 311.8 million, the EIA said. Gasoline inventories declined 3.3 million barrels. Distillate stocks fell 2.2 million barrels.

Historically, oil inventories increase as the spring quarter approaches; spring is the lowest oil use quarter in the United States.

Oil fell $1.02 to $100.82 per barrel Monday morning as traders/investors continued to lock-in profits and Saudi Arabia underscored its plans to boost production capacity, Reuters reported Monday.

The other major energy commodities were mixed in early trading Monday. Heating oil fell about 1 cent to $2.97 per gallon, unleaded gasoline rose 1 cent to $2.60 per gallon, and natural gas rose about 2 cents to $9.09 per million BTUs.

The crude oil decline Monday represents a continuation of a short-term downward trend, after oil surged more than $20 in less than two months, prompting some traders to take short-term profits, amid signs of likely slower oil demand growth in the United States.

The market early Monday was also responding to comments from Saudi Arabia, which said Sunday it is working to increase both oil production and refinery capacity in order to maintain global economic growth, according to Reuters.

Oil Analysis: The market will appreciate any comments and efforts by Saudi Arabia indicating it is striving to increase production and refining capacity. True, it takes time to increase production, but the market will take any expansion comments by the Saudis as a sign that more supply is on the way, which will lower oil prices considerably -- a welcome sight for oil importing nations and consumers.

Weekly crude oil inventories jumped 6.2 million barrels to 311.6 million barrels for the week ending March 7, 2008, well above the consensus estimate, the U.S. Energy Information Agency announced Wednesday. Weekly gasoline inventories increased 1.7 million barrels, while distillate supplies fell 1.2 million barrels.

Analysts surveyed by Bloomberg News had expected weekly oil inventories to rise by 1.7 million barrels. Oil futures fell about $1 to $107.02 per barrel immediately after the news.

Refineries operated at 85.0% of their operable capacity last week, compared to 85.9% in the previous week. However, analysts are quick to point out that some decline in refinery capacity is expected in late winter and early spring as refineries undertake maintenance and convert systems for gasoline production to get ready for the summer driving season, historically a period of high gasoline consumption in the United States.

Oil Analysis: Another bearish weekly inventory report for oil, but don't tell that to oil traders in the trading pits. Driven by institutional investors (and other investors) seeking a lucrative return on assets in the face of likely under-performing stocks and bonds, oil has to-date largely ignored a two-month rise in inventories in the largest oil consuming market, the United States, to trade at record highs. Currently, there's little hard evidence to suggest the pattern will change anytime soon.

U.S. crude oil inventories increased 3.2 million barrels for the week ending February 22, 2008, the U.S. Energy Information Administration announced Wednesday (pdf). Economists surveyed by Bloomberg had expected a 2.6 million barrel increase.

Oil continued to trade at near-record levels on the news. Oil was down 33 cents to $100.25 per barrel Wednesday at mid-day, after trading above $102 earlier in the session. The other major energy commodities were mixed at mid-day. Heating oil gained about 1 cent to $2.81 per gallon, unleaded gasoline rose 1 cent to $2.53 per gallon, and natural gas declined fell about 10 cents to $9.11 per million BTUs.

Oil closed up $1.65 to $100.88 Tuesday -- a new record-high print close -- as traders piled into the world's most vital commodity on the belief it will serve as an inflation hedge if U.S. inflation accelerates this year.

Oil had hit an intra-session high of $101.11 earlier in the day before pulling back slightly. (Oil hit an all-time high, in inflation-adjusted terms, of $102.80 per barrel in April 1980.)

Energy commodities close up

The other major energy commodities also closed higher. Heating oil gained about two cents to $2.79 per gallon, unleaded gasoline climbed about one cent to $2.54, and natural gas gained about one cent to $9.19 per million BTUs.

Independent energy trader Jim Dietz told BloggingStocks Tuesday that the market is not taking into consideration oil's bearish fundamentals, which show rising inventories in several key categories, but is trading more on psychology: namely, ambition.

With oil treading-water well above the $90 mark, a production cut by the world's largest cartel, OPEC, at its March 5 meeting would be "disruptive and scandalous," according to one economist.

Economist Steve Affinito told BloggingStocks Monday the fact that oil surged more than $10 from a pullback to $86 after certain OPEC officials hinted at a spring production cut underscores the thin margin -- or safety cushion -- that exists between global oil supply and demand. Oil closed Monday up 42 cents to $99.23.

"OPEC says it's concerned about rising oil inventories this spring due to the sluggish U.S. economy but it conveniently forgets the small safety cushion. If markets were so well supplied as they say, oil prices wouldn't jump $5 or $10 every time an OPEC oil minister expresses the slightest concern about rising inventories," Affinito said. "The fact remains that although oil markets may be 'well supplied' there's very little margin for error or production break-downs in the international oil system."

Crude oil surged $2.53 to $98.03 per barrel in early trading Tuesday on a Texas refinery fire and concern OPEC will cut production at its March meeting.

A strong explosion Monday created a fire and shut off production at an oil refinery operated by Alon USA Energy (NYSE: ALJ) near Big Spring, Texas. The facility can refine 70,000 barrels of crude per day.

Heating oil jumped about 6 cents to $2.71 per gallon, unleaded gasoline surged about 7 cents to $2.56 per gallon, and natural gas rose 26 cents to $8.92 per million BTUs.

Independent energy trader Jim Dietz told BloggingStocks Tuesday that given the U.S.'s barely-adequate refining capacity, any incident in the refinery system can cause a price spike.

"There is so little spare capacity in the system, even a fire at a minor location can have traders flashing the buy card," Dietz said. "The U.S. has decided to allow new refinery construction, but the next new facility won't be ready for about 5 to 6 years. Expansions at existing refineries will provide some additional spare capacity later this year." Dietz added that he has no open daily positions, and is short oil with monthly contracts.

The Organization of Petroleum Exporting Countries cut its forecast for Q1 2008 global oil demand by 130,000 barrels per day to 87.19 million barrels per day on the threat of a U.S. recession, the cartel announced Friday, in its latest monthly report.

"A sharp economic slowdown, especially in the U.S., may further undermine demand growth in the coming months," OPEC said. It added that current OPEC output near 32 million barrels per day could help ease market fundamentals.

Crude oil was virtually unchanged on the news Friday afternoon, rising 1 cent to $95.47 per barrel. Heating oil fell about 3 cents to $2.63 per gallon, wholesale unleaded gasoline declined about 1 cent to $2.47, and natural gas dropped about 6 cents to $8.71 per million BTUs.

The Organization of Petroleum Exporting Countries may reduce production when it meets next month as part of a strategy to try to keep the price of oil above $80 per barrel, Bloomberg News reported Friday.

Iran's Oil Minister Gholam-Hossein Nozari said Tuesday that there's no reason for OPEC states to increases oil production, PressTV Iran reported.

"There is no reason for the Organization of Petroleum Exporting Countries (OPEC) to raise output as we are approaching the warm season," Nozari noted ahead of OPEC's meeting in Vienna on Friday, February 1.

The West, including the United States, has stepped up pressure on OPEC members to increase oil production to combat persistently high energy prices that many economists believe have slowed the U.S. and global economies. OPEC supplies about 40% of the world's oil.

OPEC is said to be evaluating a potential production cut this spring, but is likely to keep its output quota the same when in meets Friday in Vienna, The Wall Street Journal (subscription required) reported.

OPEC, which produces about 40% of the world's oil, is said to be concerned that the U.S. economic slowdown could hurt oil demand growth. Oil traded 77 cents lower to $89.94 per barrel in Monday afternoon trading. Heating oil fell about 2 cents to $2.50 per gallon, unleaded gasoline declined 1 cent to $2.30 per gallon. Natural gas fell about 1 cent to $7.99 per million BTUs.

OPEC expects global oil demand of 87.4 million barrels per day in Q1 2008 and 85.5 million in Q2 2008. Meanwhile, the International Energy Agency expects slightly higher demand during the two periods, 88.2 million in Q1 2008 and 86.7 million in Q2 2008.