Oil hits 2015 high on Yemen worry; U.S. gasoline at Nov peaks

NEW YORK (Reuters) - Crude oil prices jumped 3 percent on Thursday, hitting 2015 highs while U.S. gasoline rose to its highest in nearly five months after Saudi Arabia and its allies maintained a bombing blitz in Yemen that heightened concerns about the security of Middle East oil supplies.

Oil buyers also stoked the rally with bets that U.S. crude output will shrink further after two straight weeks of declines.

The weak dollar also supported oil and other dollar-denominated commodities. The euro gained more than 1 percent against greenback, boosting oil demand from holders of the European currency. [FRX/]

U.S. crude oil's front-month futures contract, June, was up $1.86 at $58.02 a barrel by 1:48 p.m. EDT (1748 GMT). Its session high of $58.41 was a 2015 high.

June U.K. North Sea Brent, a global benchmark for oil, showed a $2.05 gain at $64.78 a barrel. Its session high was a 2015 peak of $65.58.

Front-month U.S. gasoline hit an intraday high above $2 a gallon, its highest since Nov. 26.

"The Saudi escalation of its Yemen campaign is producing exactly the kind of geopolitical tensions oil is known to rally for," said Gene McGillian, senior analyst at Tradition Energy, an oil markets advisory in Stamford, Connecticut.

"You also have the assumption that U.S. production will continue to decline from cutbacks in oil rigs count and exploration expenditure, though I'm not too much of a believer in such improving fundamentals," he said.

Warplanes from a Saudi-led coalition pounded Houthi militiamen and military bases in Yemen, residents said, two days after Riyadh announced it was ending the blitz.

The Bab el-Mandeb Strait on Yemen's southern coast controls access to the Red Sea, Suez Canal and the ports of western Saudi Arabia, the world's biggest crude exporter.

U.S. oil production notched its third weekly decline in four weeks, the U.S. Energy Information Administration said.

Oil prices have risen as much as $10 this month due to worries about Middle East supplies and signs of stronger global demand, particularly for automotive fuels.

But so far, world supplies of crude are still in a glut. Latest estimates put production by the Organization of the Petroleum Exporting Countries at almost 2 million barrels per day above demand for its oil in the first half.

U.S. government data on Wednesday showed domestic crude stockpiles rose by 5.3 million barrels last week, well above a forecast 2.9 million barrels, to a record 489 million barrels. [EIA/S]

(Additional reporting by Christopher Johnson in London and Himanshu Ojha in London and Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson, William Hardy and David Gregorio)

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