Oil Rises Above $62 on Larger-Than-Forecast U.S. Supply Decline Share | Email | Print | A A A
By Mark Shenk
May 20 (Bloomberg) -- Crude oil rose above $62 a barrel for the first time in six months after a government report showed that U.S. inventories declined more than forecast.
Stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, according to the Energy Department. A 400,000-barrel decline was forecast, according to a Bloomberg News survey. Gasoline supplies plunged 4.34 million barrels, more than three times what was forecast, to 204 million.
“The big drops in both crude and gasoline are very bullish,” said Nauman Barakat, senior vice president of energy at Macquarie Futures USA Inc. in New York. “If people were surprised by how fast crude oil moved from $50 to $60, they will be really shocked by how quickly the market will hit $70.” Crude oil for July delivery rose $1.43, or 2.4 percent, to $61.53 a barrel at 12:11 p.m. on the New York Mercantile Exchange. Futures touched $62.14, the highest price for the contract closest to expiration since Nov. 11. Oil is up 38 percent this year.
Oil traded at $61.70 a barrel before the release of the supply report at 10:30 a.m. in Washington.
Yesterday, the industry-funded American Petroleum Institute reported a decline of 4.47 million barrels for the period.
“The drop in crude stocks was widely anticipated because of yesterday’s API number,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “If it weren’t for yesterday’s report, the response to these numbers would be much stronger.”
Refinery Operations
Refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the report showed. It was the lowest utilization rate since the week ended April 10.
The profit margin, or crack spread, for making three barrels of crude into two of gasoline and one of heating oil, based on futures prices, fell 9.3 percent to $10.804 a barrel today. The margin has doubled so far this year.
“Refineries appear to be afraid to increase fuel output because demand is still very weak,” Flynn said. “The cracks have improved somewhat, but that’s not enough of an incentive to get them to kick up production.”
Total U.S. daily fuel demand averaged 18.3 million barrels in the four weeks ended May 15,
down 7.6 percent from a year earlier, the Energy Department report showed. Gasoline for June delivery climbed 4.28 cents, or 2.4 percent, to $1.8553 a gallon in New York. Futures touched $1.8724, the highest since Oct. 15.
Corpus Christi Fire
Prices also rose because of disruptions at U.S. refineries. The catalytic cracker was shut after a fire yesterday at Flint Hills Resources LLC’s Corpus Christi plant, according to the Texas Commission for Environmental Quality. A catalytic cracker is used to make products such as gasoline and diesel.
Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery following a fire on May 17. Valero Energy Corp’s Delaware City, Delaware, plant released sulfur dioxide from its fluid catalytic cracking unit on May 18, according to a filing with Delaware state regulators.
Fighting between Nigerian troops and the militant group Movement for the Emancipation of the guy Delta, or MEND, is in the seventh day after erupting on May 13. The militants, who say they are fighting to give local communities a share of Nigerian oil wealth, were ousted from two camps and 17 hostages were freed, army spokesman Colonel Rabe Abubakar said yesterday.
Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value fuels, such as gasoline, it yields.
Gasoline-Rich Crude
“If the problems in Nigeria get worse, refiners are going to miss that gasoline-rich crude,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “We could start to see some tightness, especially on the East Coast.”
The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency today. OPEC is still implementing a series of supply cuts announced last year.
“The price is telling OPEC that they don’t have to make a further cut,” Mueller said. “High prices may lead more OPEC members to exceed their production quotas.”
The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.
Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar declined 1 percent to $1.3768 per euro, from $1.363 yesterday. It earlier touched $1.3795, the lowest level since Jan. 8.
Brent crude for July settlement rose $1.07, or 1.8 percent, to $59.99 a barrel on London’s ICE Futures Europe exchange. Futures touched $60.72, the highest since Nov. 10.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
________________________
________________________
________________________
Using the logic I heard last year when prices of oil went up - that it was Bush's fault - can we now blame Obama?
