* Oil surges to 8-month high above $73 before trimming
gains
* Trade volume more than 10 times Asia norm, Brent in focus
* End-quarter fund covering may be behind sudden move
* Nigeria attacks, risk sentiment also aid gains
* U.S. oil on track for 47 pct Q2 gain, biggest since 1990
By Fayen Wong
PERTH, June 30 (Reuters) - Oil prices jumped more than 2
percent to an eight-month high above $73 a barrel on Tuesday,
as a sudden spike in Brent buying pinned on fund positioning
ushered out the market's best quarterly gain since 1990.
While the rally drew support from fresh attacks on oil
facilities in Nigeria as well as improving risk sentiment aided
by rising equity markets, traders said those factors were
secondary to the sudden big Brent bid orders that triggered the
frenzy, overwhelming liquidity during the thin Asian day.
Trading volume in both Brent and U.S. crude oil futures
surged to more than 10 times the norm for the Asian time zone
as prices leapt more than $1.50 in under half an hour around
0200 GMT, the sort of move typically only seen in the event of
hurricanes or other major disruptions.
"It feels like short-covering because of stop orders left
overnight," said a trader with a global investment bank.
Both prices and volumes cooled slightly by midday, with
U.S. crude for August delivery <CLc1> up $1.29 at $72.78 a
barrel by 0405 GMT, off its earlier eight-month high of $73.38.
August trade was 12,400 lots versus a few thousand lots
normally.
The main focus was on London ICE Brent <LCOc1> crude, with
volume in the front-month August contract surging to more than
17,000 lots versus the less than 1,000 lots normally, and
prices spiking to a peak of $73.50 a barrel. Traders said bids
for 500 or 600 lot clips spooked a market accustomed to 10-20
lot bids.
By 0407 GMT, Brent was up $1.66 to $72.65 a barrel.
Trading activity in U.S. gasoline <RBc1> and heating oil
<HOc1>, which expire at the end of the day, was minimal.
Most traders were quick to point the finger at one or
several big funds, either closing out loss-making positions,
dressing up returns by boosting prices at the end of the
quarter or perhaps taking a position in anticipation of a Q3
influx of new funds.
"This could be end of quarter movement, and traders are
trying to push prices higher and then selling before closing
their books," said Mark Pervan, senior commodities analyst at
ANZ Bank. "I haven't seen any new catalyst on the news front."
Others were more blunt about the unexplained surge in
volume, which seemed to be counter-productive given the fact
that any sizeable bid would drive up prices due to thin Asian
liquidity.
"The only reason to do that size at that time of day is to
try to move the market or because you are an idiot," said one.
Some analysts pointed to Nigeria, where the main militant
group said on Monday its fighters had attacked an oil facility
belonging to Royal Dutch Shell <RDSa.L> days after President
Umaru Yar'Adua proposed an amnesty. []
Driven by hopes of a global economic recovery, oil prices
are on track to post a near 50 percent jump in the second
quarter, the highest quarterly percentage gain since 1990.
Oil has rallied on hopes for an improving economic outlook
and a growing appetite for risk among investors, a factor given
further impetus by Asian and U.S. stock market gains.
The International Energy Agency on Monday gave a mixed view
of the medium-term outlook for the market, saying there was a
chance of an extended economic contraction and the threat of a
supply crunch had only receded, not gone away. []
(Editing by Michael Urquhart)
