Oil extends rally above $63/barrel

NEW YORK (AP) – Oil prices surged through the week, rising above $63 a barrel Friday as China reported faster economic growth and political turmoil in Iran raised concerns about future oil supplies.

Benchmark crude for August delivery jumped $1.54 to settle at $63.56 a barrel on the New York Mercantile Exchange. In London, Brent prices climbed $2.63 to settle at $65.38 a barrel on the ICE Futures exchange.

Earlier in the week, crude futures were tugged higher by a rally on Wall St., and prices continued to rise as China reported that its economy grew faster in the second quarter.

Political unrest in Iran, combined with reports of union troubles with Iraq’s Southern Oil Co., also sparked concerns about whether oil production would suffer later this year.

In Tehran, Islamic cleric Akbar Hashemi Rafsanjani criticized Iran’s crackdown on election protests at a Friday prayer service. Outside, police and militiamen fired tear gas at protesters who sided with opposition leader Mir Hossein Mousavi.

Iran sits on 136.2 billion barrels of oil, ranking behind Saudia Arabia and Canada in proven reserves, according to the Energy Information Administration. Ongoing political turmoil there could disrupt supplies in the future and possibly force crude prices higher.

“The Iranian regime may be falling apart at the edges, and you don’t want to be short on oil when this is happening,” analyst Phil Flynn said.

Oil prices also were buoyed by a US government report that new home construction rose in June to the highest level in seven months. And Bank of America Corp. and Citigroup Inc. reported big second-quarter profits.

Still, with the country swimming in surplus oil and consumer demand hovering around 10-year lows, analysts struggled to find a fundamental reason for an extended rally in oil.

Analyst Stephen Schork said investors, especially those who have no commercial use for the oil contracts they’re buying, aren’t basing their decisions on the economy’s present condition. They’re simply buying oil right now on the expectation that the economy will eventually heal.

“We’re trying to get at the bottom of the next great rally,” Schork said. “It’s just one giant crapshoot.”

In other Nymex trading, gasoline for August delivery added 5.64 cents to settle at $1.7699 a gallon and heating oil climbed 4.16 cents to settle at $1.641 a gallon. Natural gas for August delivery ticked higher by a fraction of a penny to settle at $3.669 per 1,000 cubic feet.