Oil Prices Rise As Traders Watch Storm

A Shell gas station is shown in Fremont, Calif., Monday, July 24, 2006. Royal Dutch Shell PLC came close to matching Exxon Mobil Corp.'s 36 percent quarterly earnings boost on Thursday, posting net income of $7.3 billion, an increase of 40 percent from the year before. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

SINGAPORE -- Oil prices rose Wednesday as traders nervously watched a tropical storm in the Caribbean and the fighting in the Middle East, fearing supply threats.

Light sweet crude for September delivery rose 47 cents to $75.38 a barrel in electronic trading on the New York Mercantile Exchange.

Tropical Storm Chris has formed near the Leeward Islands in the Caribbean, raising traders' fears that it could strengthen and damage oil platforms and refineries along the Gulf Coast. And in the Middle East, there were few signs of a quick resolution to the escalating conflict. Last week's disruption in oil supply in Nigeria was also a factor in the prices.

"There are many issues that are supportive of strong prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "However, barring any change in the geopolitical situation or a hurricane, I expect prices to stay around the mid-70s for the near term."

Traders were also awaiting a U.S. oil and gas inventory report due later Wednesday. While U.S. demand for natural gas is no doubt higher, analysts noted that the country has ample supplies. According to the Energy Department last week, U.S. has 2.76 trillion cubic feet of natural gas in underground storage. The five-year average for this time of year is 2.27 trillion cubic feet.

In other Nymex trading, natural gas futures were up 36.6 cents to $7.940 per 1,000 cubic feet after surging 14 percent on Monday to settle at $8.211, the highest close since early February. Heating oil rose marginally to $2.0895 a gallon and gasoline futures were up 1.88 cents to $2.2950 a gallon.

Oil traders have been focused for nearly three weeks on the violence between Israel and Hezbollah guerrillas in Lebanon. Israel on Tuesday launched a major attack deep into Lebanon, and Hezbollah said its guerrillas were fighting Israeli commandos trapped inside a hospital in the eastern city of Baalbek early Wednesday.

Traders are fearful of possible supply interruptions in the region. Iran, OPEC's No. 2 supplier, is a backer of Hezbollah and is in the midst of a diplomatic standoff with the United Nations over its nuclear program.

On Tuesday, Iranian President Mahmoud Ahmadinejad rejected a U.N. Security Council resolution that would give his nation until Aug. 31 to suspend uranium enrichment.