March 3, 2005
Bloomberg
Crude oil traded near yesterday's $53.05 a barrel close in New York after an inventory report increased concern that shutdowns may leave refiners unable to keep pace with rising demand.
U.S. refinery processing fell to the lowest since October, when companies were performing repairs after a hurricane hit the Gulf of Mexico, an Energy Department report yesterday showed. Shutdowns at refiners such as Lyondell-Citgo Refining LP may deepen cuts in production.
``The refinery outage in Texas is making people think that while gasoline stocks are good, this refinery problem is a sign of things to come and maybe they won't be good for that much longer,'' said David Thurtell, a Sydney-based commodity strategist at Commonwealth Bank of Australia.
Crude oil for April delivery fell 10 cents to $52.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 12:37 p.m. Sydney time. Yesterday, the contract gained $1.37, or 2.7 percent, to close at its highest since Oct. 26. Prices were up 45 percent from a year ago.
Gasoline for April delivery yesterday rose 8.11 cents, or 5.8 percent, to $1.4838 a gallon in New York, the highest close since the contract began trading in 1984 and 30 percent higher than a year ago. The contract was at $1.4770 in after-hours trading.
``There has been a string of refinery disruptions when we need all of our refineries to be up and running,'' said John Kilduff, senior vice president of energy risk management with Fimat USA in New York. ``There is a speculative element as well. There are too many dollars chasing too few barrels of oil.''
Refinery Outages
Lyondell-Citgo Refining, a joint venture between Lyondell Chemical Co. and Citgo Petroleum Corp., shut a unit at its Houston crude-oil refinery yesterday, state regulators said.
Lyondell Chemical spokesman David Harpole declined to comment on the report or the refinery's operations. The refinery can process 265,000 barrels of crude oil a day.
A fire on Feb. 26 at BP Plc's Whiting, Indiana refinery didn't reduce crude-oil processing or fuel production at the company's second-largest plant, a spokesman said.
U.S. gasoline stockpiles climbed 973,000 barrels to 224.5 million in the week ended Feb. 28, the energy department report showed. Analysts expected an increase of 1.1 million barrels. Gasoline supplies have risen 10.4 percent in the past year.
Inventories of distillate fuel, a category that includes heating oil and diesel, fell 1.7 million barrels to 110 million, the report showed. Analysts expected a 1.2 million barrel decline.
Oil Inventories
``Distillates were down again and the market is just very nervous about that,'' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia in Sydney. ``The refinery outage in Texas is making people think that while gasoline stocks are good, this refinery problem is a sign of things to come and maybe they won't be good for that much longer.''
U.S. crude-oil inventories gained 2.4 million barrels to 299.4 million, the highest since July. The median forecast of 12 analysts surveyed by Bloomberg was for a rise of 1 million barrels.
``The crude number was slightly bigger than expected while the gasoline and distillate numbers were right on the money,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. ``The most important thing about the numbers is that they are out of the way, which is allowing the funds to come in and buy crude with both hands.''
Speculators, including investment funds, last week had their biggest bet on higher oil prices in eight months, according to the Commodity Futures Trading Commission. So-called net-longs in New York soared by 22,548 contracts to 54,176 in the week ended Feb. 22, the commission reported. The net-long positions peaked at 82,451 contracts in March 2004.
$60 a Barrel?
Investors are ``more comfortable'' buying oil futures now the weekly Energy Department report has been released, said Mike Armbruster, co-founder of Altavest Worldwide Trading Inc. in Laguna Hills, California.
``There's less risk of a nasty surprise one way or the other'' now the report is out, he said. ``This is a very strong bull market and it's likely to go toward $60 before it slows down.''
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, is concerned that rising inventories will lead to a decline in prices during the second quarter of the year. OPEC will discuss production targets at a meeting in Isfahan, Iran, on March 16.
The 11-member group's president, Sheikh Ahmad Fahd al-Ahmad al-Sabah, who is also the Kuwaiti oil minister, said in January OPEC may be willing to let global inventories get large enough to cover 56 days of demand before it cuts supplies. Al-Sabah said inventories covered 52 days of demand on Jan. 30.
``The higher-than-expected gain in crude oil inventories ensures that OPEC won't be increasing production when they meet,'' said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago.
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