* Oil surges to 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
(Updates prices, adds analyst comments, inventory forecast)
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
cemented the market's best quarterly gain since 1990.
While the rally drew support from fresh attacks on oil
facilities in Nigeria, improving risk sentiment aided by rising
equity markets and a weaker dollar, 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 $1.40 at $72.89 a
barrel by 0603 GMT, off its earlier eight-month high of $73.38.
August trade was 14,200 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
19,000 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 0604 GMT, Brent was up $1.62 to $72.61 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 third
quarter 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. []
OIL RALLY
"The question now is if the gains can be sustained later
during New York trading," said Toby Hassall, an analyst at
Commodities Warrants Australia.
"We've got some big numbers on the economic calendar this
week, and if the numbers can support the bullish sentiment,
prices could extend a leg up and test the $75 levels."
A Reuters poll of analysts ahead of weekly inventory data
forecast U.S. crude stockpiles fell by 1.6 million barrels last
week, while gasoline stocks were seen up 2 million barrels and
distillate stocks rose 1.5 million barrels. []
The American Petroleum Institute will release its weekly
U.S. inventory at 2030 GMT, while the U.S. Energy Information
Administration report is due out on Wednesday.
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.
(Reporting by Fayen Wong; Editing by Michael Urquhart)
