Oil Pices rise slightly

Discussion in 'Wall St. News' started by universaltrader, Mar 21, 2007.

  1. yahoo
    Wednesday March 21, 11:45 am ET
    By Madlen Read, AP Business Writer
    Oil Rises Modestly on Drop in U.S. Inventories of Gasoline

    NEW YORK (AP) -- Crude and gasoline prices edged higher Wednesday after the U.S. government said gasoline inventories dropped for the sixth straight week, raising the possibility that supplies will be tight going into the peak driving season.

    Though crude prices have been fairly stable in recent months, gasoline prices have been surging as traders anticipate a spike in demand in the summer amid low inventories and refinery outages. At the retail level, pump prices have risen about 19 percent over the past two months.

    It's not atypical for refineries to be losing inventory as they perform seasonal maintenance at this time of year, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., but he noted that he expects the average national retail gasoline price to rise to about $2.75 a gallon in the coming weeks.

    "We're seeing the beginning of a rebound in post-maintenance refinery activity, but we have a long ways to go," he said. Refinery operated at 86.3 percent capacity last week, up 0.7 percent from the prior week.

    The average U.S. price of a gallon of regular gasoline was $2.564 on Wednesday, according to AAA. That's up about 30 cents from a month ago, and about 6 cents higher than the same time a year ago.

    Light, sweet crude for May delivery gained 14 cents to $59.39 a barrel in late morning trading on the New York Mercantile Exchange.

    U.S. crude oil inventories rose last week, according to the Energy Information Administration's weekly report, by 4 million barrels to 329.3 million barrels in the week ended March 16, more than analysts polled by Dow Jones Newswires expected.

    Gasoline futures for April rose 0.85 cent to $1.9506 a gallon. The gains were small, as the contract hit some resistance after briefly surpassing a six-month high on Tuesday.

    Gasoline stocks fell by 3.4 million barrels to 210.5 million barrels, the EIA said. Analysts estimated a smaller decline of 1.6 million barrels of gasoline inventories.

    "With this additional draw in gasoline, we're going to remain sensitized to any refinery problem that comes along," Ritterbusch said. "That will be the main feature in the market for the next couple weeks -- when you have gasoline supplies this low, any refinery glitch at all tends to be magnified."

    Heating oil futures for April fell less than a cent to $1.6629 a gallon, while natural gas prices gained 14.5 cents to $7.055 per 1,000 cubic feet.

    Stocks of distillates, which include heating oil and distillates, also fell 1.7 million barrels to 118.7 million barrels, a slightly wider drop than the 1.1 million barrels analysts were anticipating.

    The London-based Center for Global Energy Studies, an international energy group, has warned that oil prices would spike in the summer if the Organization of Petroleum Exporting Countries does not increase output. In a report released Monday, it urged OPEC to raise output so refiners have enough crude.

    Late last year, OPEC member nations pledged to shore up falling oil prices by reducing their oil output by 1.7 million barrels a day. The group decided last week to maintain present production targets.

    But at the moment, crude oil supply is not a problem in the United States.

    "We have plenty of it," Ritterbusch said, noting that crude prices are being propped up by the huge price premiums for gasoline. "It perpetuates this recent dichotomy between strength in gasoline and weakness in crude oil ... the product strength usually wins out in such a tug of war."