Domestic crude oil closed above US$67 a barrel yesterday for the first time since September on continuing concerns that the refining industry in the United States is not producing enough gasoline to meet summer driving demand.

That worry, which drove gas prices at the pump to record levels last month, was exacerbated by Wednesday's government report that showed refinery utilization fell last week, and that gasoline inventories did not grow, The Associated Press reported.

"This is no longer an aberration, it is an industry-wide disaster," wrote Peter Beutel, an analyst at Cameron Hanover, in a research note.

Much of yesterday's advance was driven by technical buying by large hedge funds triggered by Wednesday's report, said Jack Hunter, an energy trader at FC Stone Group in Kansas City.

Light, sweet crude for July delivery rose US$1.39 to settle at US$67.65 a barrel on the New York Mercantile Exchange. That was the front month contract's highest close since September 5, when it settled at US$68.60. Gasoline futures for July jumped 6.94 cents to settle at US$2.2247, also on the Nymex. Both contracts also gained Wednesday, after the Energy Department's report was released.

The July Brent crude contract rose US$1.02 to settle at US$70.96 on the ICE Futures exchange in London.

"We're seeing some fairly heavy fund buying," Hunter said. "Their activities really do dictate some of the big price movements."

Retail gas prices, which often trail the futures market, fell again. The average national price of a gallon of gas fell 1.1 cents overnight to US$3.043 (30 US cents a liter), according to AAA and the Oil Price Information Service. Prices peaked at US$3.227 a gallon in late May.

In other Nymex trading, heating oil futures rose 5.41 cents to settle at US$2.0161 a gallon while natural gas prices gained 20 cents to settle at US$7.808 per 1,000 cubic feet. Natural gas inventories rose by 92 billion cubic feet last week, about 7 billion cubic feet shy of expectations, according to a report yesterday by the Energy Department's Energy Information Administration. The strong natural gas prices were also supporting oil and gasoline futures prices, Hunter said.

"People are concerned that gasoline inventories remain low," said Michael Lynch, president of Strategic Energy and Economic Research Inc., in Winchester, Massachusetts.

Refinery utilization, which had been expected to grow by 0.8 percent, fell 0.4 percent to 89.2 percent, the second straight weekly decline, according to the EIA. Most analysts say refineries should be using 94 percent to 95 percent of their capacity at this time of year.

"There were general expectations that gasoline inventories would continue to build ... but the market didn't see it," said Victor Shum, an energy analyst with Purvin & Gertz Inc. in Singapore.

Gas inventories were unchanged at 201.5 million barrels for the week ended June 8, the EIA report said. Analysts surveyed by Dow Jones Newswires expected inventories to rise by 2 million barrels.

The refining industry is still struggling to recover from the effects of Hurricanes Katrina and Rita two years ago, analysts said.

"It suggests that a number of refineries were severely affected by the big hurricanes, and that no one told anybody," Beutel wrote. "The storms cast a stronger shadow than envisioned."

Based on the fact that utilization levels are 6 percent below historic averages, the EIA numbers suggest that 5 percent to 6 percent of refinery capacity may have been more damaged than anyone suspected, Beutel wrote.

But Lynch thinks the issue is not damage from the hurricanes, but deferred maintenance. When the storms hit the Gulf Coast, refiners elsewhere had to pick up the slack. Many put off planned maintenance until this year.

"Refineries are having a hard time coming back," said Lynch.

Reports yesterday that two Corpus Christi, Texas, refineries were coming back online did little to assuage the market's general sentiment, Lynch said.

Man Energy analyst Edward Meir noted one overlooked positive in the EIA report: Gasoline production increased slightly, although refinery utilization fell. That suggests, Meir wrote, that while refineries are using less of their overall capacity, more of the capacity that is in use is being shifted from making other products to producing gasoline.

Also supporting prices were tensions between the West and Iran, which continues to assert it will never suspend uranium enrichment, and the Organization of Petroleum Exporting Countries' refusal to boost production, Hunter said.