Oil Prices Rise on Production Fears
by Alan Fein
New York - Oil prices rose Wednesday following the Energy Department's
Supply report showing that gasoline demand had increased,
coupled with lingering production fears in the Middle East.
Crude oil for April delivery was up 56 cents per barrel at
$61.97 in late afternoon trading in New York, after rising
as high as $62.30 earlier. Unleaded gasoline rose over 3
cents a gallon to $1.62 while heating oil futures were
up 2.4 cents at $1.74 a gallon.
The US Department of Energy reported that crude oil and
gasoline stocks rose last week while distilled fuels,
desiel and heating oil, fell.
While the Department of Energy's report indicates that
supplies of oil and gasoline are plentiful, commodity
traders still showed concern over last week's market jitters
following the bomb attack on Saudi Arabia's largest oil
processing facility and rebel attacks in Nigeria that shut
in 20 percent of its daily oil production. Adding to
production fears was Iran's situation over its nuclear
plans still being up in the air. But what really put
the market on alert was a GCC report that said crude
oil prices would be higher based on unsettled political
issues in the Middle East.
The Department of Energy's report said that US crude oil
inventories rose 1.6 million barrels to 328.3 million barrels
in the week ended Feb. 24. Gasoline inventories edged up
300,000 barrels to 225.9 million barrels, while distillate
inventories dropped 1.5 million barrels to 134.1 million
barrels. Even though distillate stocks were lower they
still remain 14 percent above year-ago levels.
The report noted that US gasoline demand over the past
four weeks was 9 million barrels a day, 2.5 percent above
last year's levels, and that gasoline production declined
last week from the prior week.
The news on gasoline inventories didn't affect traders but
the drop in production levels did as March production is
an early indicator to the market in front of the summer
season when consumption levels rise.
This spring is the phase-out of the controversial additive
MTBE from the United States' gasoline supply and changes
refiners need to undertake for the transition to gasoline
blended with ethanol may give rise to local imbalances
between supply and demand and associated price surges
during the change. For those reasons, traders are
expecting a rally in gasoline futures.
|