Rising oil prices top $71 a barrel

NEW YORK — Oil prices rebounded Monday from early declines to settle above $71 for the first time in 10 months as traders focused on a refinery outage in Kansas and new accusations about Iran's role in Lebanon and Iraq.

Early in the day, investors sold to lock in profits from last week's rally, which drove prices above $70 a barrel for the first time since August.

But as the day wore on, light sweet crude for August delivery rose, settling 41 cents higher at $71.09 a barrel on the New York Mercantile Exchange (Nymex) and up from a session low of $69.57.

Retail gasoline prices extended their decline despite the recent surge in futures prices. The average national price of a gallon of gas fell to $2.957, down 0.4 cent overnight and off 27 cents from its May peak of $3.227, according to AAA and the Oil Price Information Service.

The closure of a 108,000 barrel-per-day refinery in Coffeyville, Kan., because of flooding reignited concerns about refiners' ability to keep pace with summer demand, said John Kilduff, vice president of risk management at Man Financial. The Coffeyville Resources refinery can produce 2.1 million gallons of gasoline per day.

"These days, every little bit counts," Kilduff said.

The concern is particularly acute with the nation entering the peak driving season between July Fourth and Labor Day.

Last week, the federal Energy Information Administration reported gasoline inventories had dropped 700,000 barrels in the week ended June 22, when analysts polled by Dow Jones Newswires had expected a 1.1 million barrel gain.

But while refiners have experienced an unusual number of unplanned outages this year, analysts say there are signs more facilities are coming back on line.

That perception was aided by last week's inventory report, which showed refinery utilization jumped 1.8 percent, higher than the 0.8 percentage-point increase analysts had expected.

Some analysts say they think that means a big increase in gasoline inventories is pending.

"With refinery runs up, I think people are expecting some growth in product inventories this week," said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Mass.

Others disagree. Addison Armstrong, an analyst at TFS Energy in Stamford, Conn., expects inventories to fall by almost 1 million barrels as consumers pour the additional fuel from refiners straight into their vacation-bound gas tanks.

The market's fundamentals simply support high oil and gas prices, Kilduff said.

"Our advice, what we're telling people, is buy the dips," Kilduff said. "It's more just trading the range."

Inventories have built up this spring in Cushing, Okla., the Nymex delivery point, behind the bottleneck of out-of-commission domestic refineries. Now, with refineries returning to service, crude inventories are falling.

"We continue to believe that prices will trade above $75 and may even try to test $78.40," wrote Peter Beutel, president of U.S. energy risk management firm Cameron Hanover, in a research note.

Associated Press reporters Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.