"concern that refiners won't produce enough gasoline"

June 1 (Bloomberg) -- Crude oil rose for a seventh straight session as refinery malfunctions raised concern that refiners won't produce enough gasoline to meet peak demand this summer.

Operating rates jumped in nine of the last 12 weeks as refiners struggle to meet rising demand, U.S. government figures show. Royal Dutch/Shell Group shut two units at its Deer Park, Texas, refinery on May 30. Analysts were divided on whether a report tomorrow will show that oil supplies rose or fell last week after an unexpected supply decline the week ended May 20.

``We have some supply bottlenecks coupled with pretty strong product demand,'' said Marshall Steeves, an analyst with Refco Inc. in New York. ``We are continuing to rethink the direction of crude oil stocks after last week's surprise.''

Crude oil for July delivery rose 88 cents, or 1.7 percent, to $52.85 a barrel at 12:06 p.m. on the New York Mercantile Exchange. Futures touched $53, the highest since May 10. Prices are up 25 percent from a year ago.

The rally is the longest since nine straight gains in sessions from Sept. 16 to 28, when Hurricane Ivan shut platforms in the Gulf of Mexico.

Shell said two reformer units at its Deer Park, Texas, refinery, the sixth-largest in the U.S., are in ``startup mode.'' The units will return to normal operations by tomorrow, Shell spokesman David McKinney said in an e-mailed statement. The refinery, a joint venture between Shell and Mexico's state oil company, Petroleos Mexicanos, can process 340,000 barrels of crude oil a day, according to the company's Web site.

Exxon Mobil Corp.'s Baytown, Texas, oil refinery shut two furnaces at a unit that makes gasoline on May 23. The company said that the refinery was ``operating normally,'' according to an Exxon Mobil spokeswoman on May 25. The Baytown refinery, the nation's largest, can process 557,000 barrels of oil a day.

Refinery Operations

U.S. refineries operated at 94.6 percent of capacity the week ended May 20, according to the Energy Department, which will publish its next report on petroleum inventories tomorrow at 10:30 a.m. in Washington, a day later than usual because of the Memorial Day holiday two days ago.

Refiners may boost fuel output in June to take advantage of high profit margins, analysts said. The profit from making a barrel of crude oil into gasoline and heating oil rose to $9.892 today. The profit margin is based on the price of futures traded on the New York Mercantile Exchange.

``There is every incentive for refiners to crank out as much gasoline and distillate as they can,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte. ``We are vulnerable to accidents and other refining problems because of how tight capacity is.''

U.S. Inventories

U.S. crude-oil supplies probably rose 250,000 barrels in the week ended May 27 from 332.4 million barrels the previous week, according to the median of forecasts by 13 analysts before an Energy Department report tomorrow. Seven of the analysts expected an increase, five a decline and one said they were unchanged. The U.S. consumes 25 percent of the world's oil.

U.S. crude oil stockpiles fell from a six-year high in the week ended May 20, declining by 1.6 million barrels, the department reported on May 25. An increase of 1.5 million barrels was expected, according to the median of forecasts.

In London, the July Brent crude-oil futures contract rose 89 cents, or 1.8 percent, to $51.62 a barrel on the International Petroleum Exchange. Prices touched $51.72, the highest since May 10.

The Organization of Petroleum Exporting Countries will probably decide to leave its oil production targets unchanged when it meets in Vienna on June 15, the group's president, Sheikh Ahmad Fahd al-Sabah said today, according to Agence France-Presse. OPEC will keep exceeding the quota, al-Sabah, who is also Kuwait's oil minister, told reporters in Kuwait today.

To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.