April 5, 2012 / 5:36 AM / 6 years ago

UPDATE 9-Oil rises as US data, supply fears fuel rebound

 * U.S. jobless claims drop to near four-year low
 * Iraq-Turkey pipelines shut after explosions
 * Chinese insurer drops coverage for tankers with Iranian
 * Coming up: U.S. nonfarm payrolls data for March, Friday

 (Recasts, updates volume, adds details and new analyst comment)	
 By Gene Ramos	
 NEW YORK,  April 5 (Reuters) - Oil rose on Thursday after
two straight days of losses, as a drop in U.S. jobless claims to
near four-year lows and fears of Iran-related supply disruptions
spurred a rebound from the previous session's heavy losses.	
 Data from the U.S. Labor Department showing first-time
claims for state unemployment benefits fell to the lowest level
since April 2008 gave U.S. prices an early boost, with further
strength coming from short covering ahead of the three-day
holiday weekend. 
 In recent months, new jobless claims have fallen sharply,
boosting hopes that the end of a long stretch of heavy layoffs
will lead to more hiring, ultimately boosting demand for motor
fuel and other energy products.
 Fears of supply shrinkage also helped push oil higher,
highlighted by a note to clients from JPMorgan that
Iran's crude oil production could fall 1 million barrels per day
by the end of June to below 2.5 million bpd. 
 The reason is that refiners have cut oil demand from the
Islamic Republic faster than previously expected, the bank said,
ahead of a European Union embargo on Iranian that takes effect
by July 1.
  In London, ICE Brent crude for May delivery settled
at $123.43 per barrel, up $1.09, climbing back from the session
low of $121.82. For the week, the contract rose 55 cents, after
three consecutive down weeks.	
  U.S. May crude settled at $103.31 a barrel, gaining
$1.84, after climbing to the day's high of $103.40 in a late
burst of short-covering. For the week, the contract rose 29
cents, ending three successive weeks of losses.	
 "The move higher on crude has also liquidated the gasoline
crack, which hit a high of more than $40 yesterday, but has
fallen to $36.75 today," added Tony Rosado, options broker ag GA
Global Markets in New York.	
 Brent crude's premium against U.S. crude narrowed to $20.12
at the close, after hitting $21.72 on Wednesday, the widest
since October, supported by U.S. government data showing oil
stockpiles at the U.S. delivery hub in Cushing, Oklahoma, rose
sharply last week to hit their highest level since May 21.  
 Total U.S. crude oil inventories jumped by more than 16
million barrels over the past two weeks, the biggest increase
since March 2001. The rise eased concerns about supplies after a
string of outages from the North Sea, South Sudan, and Syria as
well as the potential loss of Iranian exports due to U.S. and EU
sanctions sent Brent prices up 15 percent this year.	
 Wednesday's oil futures slumped more than 2 percent as a
 "With oil falling so sharply, traders simply grabbed WTI
today, but upside movements on Brent and U.S. product futures
were not as strong," said Tim Evans, energy analyst at Citi
Futures Perspective in New York.	
 "Book squaring ahead of the long weekend and short-term
technical support also figured in the day's trade," Evans added.	
 Thursday's Brent crude trading volume was down 4 percent
while U.S. crude dealings fell 24 percent, both based on their
30-day average, according to Reuters data.	
 In early trade, supply disruption worries lifted prices on
news that a major Chinese ship insurer will halt indemnity
coverage for tankers carrying Iranian oil, a move that could
seriously complicate Iran's oil exports before the EU embargo
comes into force..	
 China is the top buyer of Iranian crude and the insurance
move is the first sign Chinese refiners may struggle to obtain
shipping and insurance coverage the4y nee3d to keep importing
from OPEC's second biggest producer.
 Japanese refiners also plan to cut crude imports from Tehran
yet again in April as they shy away from renewing annual
 Adding to supply worries, explosions had temporarily shut on
Thursday both of the pipelines bringing about a quarter of
Iraq's crude exports from Kirkuk to the Turkish port of Ceyhan
on the Mediterranean. 
 News that a rocket fired from Egypt's Sinai desert struck
the southern Israeli resort of Eilat on Thursday also fuelled
the early rise in oil prices, traders said. 	
 "Geopolitical and supply risk worries are pushing oil prices
higher ahead of a three-day holiday weekend," said Gene
McGillian, analyst at Tradition Energy in Stamford, Connecticut.	
 A report that Royal Dutch Shell will cut production
from the Mars field, a major supplier of sour crude from the
Gulf of Mexico, according to trading sources, also added to
supply uncertainties, particularly for U.S. crude.
 The latest weekly jobless claims report, which was just
above analysts' forecasts, has no direct relationship to the
March U.S. unemployment report, which is due on Friday.
 Economists polled by Reuters expect the nonfarm payrolls
report will show the U.S. economy added 203,000 jobs last month.
That would represent a fourth straight month of solid job
creation, marking the longest stretch of monthly employment
gains topping 200,000 since 1999.	
 The unemployment rate is expected to hold at a 8.3 percent
in March.
 Should the data turn out to be below expectations and by
Sunday night (when Asian equity markets begin trading) equities
get hammered, "oil could make a charge to the downside" when
U.S. trading resumes on Monday, said Richard Ilczyszyn, chief
market strategist and founder of iitrader.comLLC in Chicago.	
 (Additional reporting by Robert Gibbons and Jeffrey Kerr in New
York, Ikuko Kurahone in London; editing by Sofina Mirza-Reid,
David Gregorio, Matt Robinson, and Bob Burgdorfer)	
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