March 24 (Bloomberg) -- Gasoline futures surged to a record and crude oil rose after an explosion at BP Plc's Texas City refinery, which supplies 3 percent of U.S. fuels, raised concern about supplies just before the peak summer driving season.

At least 14 people died and more than 70 were injured by the blast, BP refinery manager Don Parus said in Texas yesterday. The increase in prices follows OPEC's decision to pump nearly as much oil as it can to meet surging global demand, while retail prices for U.S. gasoline rose to a record this week.

``We know that prices will automatically react to any supply disruption because the entire oil-supply chain is working on a just-in-time basis,'' said Frederic Lasserre, the head of commodities research at Societe Generale SA in Paris. ``So far, the explosion has stopped the selling wave.''

Gasoline for April delivery surged as much as 2.1 cents, or 3.3 percent, to $1.6080 a gallon on the New York Mercantile Exchange and was up 1.76 cents at $1.5925 a gallon at 11:16 a.m. London time. Crude for May delivery jumped 55 cents, or 1 percent, to $54.36 a barrel.

Crude fell $2.22 a barrel yesterday, or 4 percent, its biggest one-day drop this year after the U.S. government said crude supplies soared to their highest since July 2002. In the past week, prices have declined 5.6 percent from a record $57.60 on March 17. They have still gained 47 percent in the past year.

Driving Season

Refiners attempt to accumulate gasoline for the so-called driving season, which lasts for about three months in the U.S., from the Memorial Day holiday in late May to the Labor Day holiday in early September. U.S. stockpiles last week dropped almost three times as much as expected, by 4.1 million barrels.

The blast ``is going to exacerbate the bottlenecks of refining, having more than a short-term effect'' as gasoline demand climbs in the Northern Hemisphere, said Simon Wardell, an analyst at Global Insight Inc. in London. ``We are going to see gasoline prices in the U.S. increase quite substantially.''

Yesterday's refinery explosion at 1:20 p.m. local time occurred in a unit that makes components that boost octane in gasoline. BP Chief Executive John Browne will travel to Texas today to meet employees and families affected by the blast. The incident was at least the fourth in the past year at the Texas City plant that caused injuries or a partial plant shutdown.

OPEC Output

The days of demand that can be satisfied with U.S. gasoline stockpiles has steadily dropped in the past two years, according to the Energy Department. Surging motor-fuel consumption damps the effect on prices of high inventory levels.

The average weekly retail price of gasoline in the U.S. jumped to a record high of $2.11 a gallon as of March 21, the Department said in a report yesterday. Record prices may hurt the economy as consumers earmark a greater part of their income for transport.

``If you have a situation where supply is constrained and there's limited spare production capacity, it's very clear which side of the supply and demand equation needs to be adjusted,'' said Lawrence Eagles, an analyst at the International Energy Agency in Paris. ``It's up to consumers to respond to the price signals the market has already sent them.''

The Organization of Petroleum Exporting Countries, producer of about 40 percent of the world's oil, is discussing the second 500,000-barrel-a-day increase in production quotas this year. If implemented, it would take the self-imposed limit to a record 28 million barrels a day for the 10 members restrained by quotas, all except Iraq.

China Boom

A 33 percent surge in Brent oil prices this year has been driven by faster-than-expected demand growth, led by China and the U.S. Global consumption grew by 3.4 percent last year, the biggest increase in almost two decades. The IEA forecasts it will rise by 2.2 percent in 2005.

Brent crude for May settlement jumped 75 cents, or 1.4 percent, to $53.79 a barrel at 11:13 a.m. on London's International Petroleum Exchange, after tumbling 2.8 percent yesterday.

The BP refinery, the third-largest in the U.S. and the company's largest, stretches over 1,200 acres and employs about 1,800 workers. It produces about 30 percent of BP's fuel supply in North America, according to the company's Web site, and can process 460,000 barrels of oil a day.

Interest Rates

The damage at the refinery seems to be confined to one unit, said Andrew Bell, a London-based European equity strategist at Carr Sheppards Crosthwaite, which oversees the equivalent of $11.9 billion, including BP stock. ``The next likely move for the oil price will be downward.''

Prices have fallen more than $3 from last week's record amid signs that higher U.S. interest rates will slow economic growth and fuel consumption. The Federal Reserve raised the benchmark interest rate on March 22 for the seventh time since June, saying inflation pressures have picked up. Prices paid by U.S. consumers rose 0.4 percent in February.

``People have been shaken by what the Fed has done to keep inflation in check,'' said Robert Montefusco, a broker at Sucden (U.K.) Ltd. ``Demand for oil is still out there and the Fed is trying to ease it. If we had this explosion two weeks ago, we would've surely gone to $60 a barrel, but the Fed has prompted funds to get out.''

Speculative long positions of crude oil on Nymex, or bets that prices will rise, were at their highest since May the week ended March 8, falling for the first week in five last week, according to the Commodity Futures Trading Commission.

Gasoline supplied, a demand indicator, fell to 9.1 million barrels a day for the week ended March 18, according to government figures. U.S. refineries operated at 90.2 percent capacity last week, the Energy Department said yesterday, as they perform seasonal maintenance.

The Nymex and the IPE will shut for the Good Friday holiday tomorrow. The London exchange will remain closed March 28 for the Easter Monday holiday.

To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net.

Last Updated: March 24, 2005 07:02 EST