|
Oil high despite oil inventories record highs { February 2006 } Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=a8UqKcMBrg8Y&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=a8UqKcMBrg8Y&refer=home
Oil Plunges as U.S. Supplies Surge; OPEC to Keep Output Target
March 8 (Bloomberg) -- Crude oil plunged almost $2 a barrel in New York after the U.S. reported a larger-than-expected gain in stockpiles and the Organization of Petroleum Exporting Countries left production near a two-decade high.
U.S. crude-oil inventories jumped 6.8 million barrels to 335.1 million last week, the Energy Department reported. Analysts surveyed by Bloomberg News expected an increase of 1.6 million barrels. OPEC agreed to keep quotas at 28 million barrels a day in Vienna today. The 11-member group will meet again June 1 to review the accord.
``The last time inventories were this high was in early 1999 when prices were below $20 a barrel,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``OPEC wants prices to fall. Saudi Arabia and other members remember that when prices spiked in the 70s there was a rash of investment and they lost a lot of market share for a long time.''
Crude oil for April delivery fell $1.73, or 2.8 percent, to $59.85 a barrel at 1:33 p.m. on the New York Mercantile Exchange. Prices, which have slipped 6 percent this week, are up 9.6 percent from a year ago.
Brent crude oil for April settlement declined $1.39, or 2.3 percent, to $59.78 a barrel on London's ICE Futures exchange.
``We're not going to overreact to this extraordinary period'' of high prices, said Rex Tillerson, chairman of Exxon Mobil Corp., the world's largest oil company, in an interview yesterday. ``This is an industry that lives in cycles. The price environment we're in today is not sustainable.''
Inventories Jump
U.S. crude-oil supplies jumped 4.5 percent in the four weeks ended March 3, leaving them at the highest since May 1999, the department said. Last week's gain was the biggest since Oct. 29, 2004, the report showed. The increase left supplies 14 percent above the five-year average for the week, the department said. Inventories were 12 percent above average a week ago.
The department released its weekly report on petroleum inventories at 10:30 a.m. in Washington.
Stockpiles may rise further in the weeks ahead because spot prices are cheaper than futures for oil delivered later in the year, a price difference traders call ``contango.'' Crude oil for May delivery fell $1.72, or 2.7 percent, to $61.60 a barrel, a $1.75 premium over the April contract. The June contract slipped $1.58, or 2.5 percent, to $62.50 a barrel.
``OPEC ministers realize the market is in contango and they are hoping that it will lead to inventory growth, which will move prices lower,'' said Antonio Szabo, chief executive of Houston consultant Stone Bond Technologies.
Nigerian Production
OPEC President Edmund Daukoru yesterday said violence in Nigeria has cut production in the country by 556,000 barrels a day, easing pressure on the group to reduce output. Daukoru is also Nigeria's oil minister.
``Right now the goal of the Saudis, Kuwaitis and the other members of the Gulf Cooperation Council is to see prices fall,'' Szabo said. ``They are very sensitive to the position of the U.S. and the rest of the industrial world. The moderate states want to see prices between $50 and $55 a barrel.''
The United Nations' nuclear agency cleared the way for the Security Council to weigh possible political or economic sanctions against Iran after three years of inspections failed to declare the Islamic Republic's atomic work peaceful. Iran is OPEC's second-biggest oil producer.
The Security Council will call on Iran to cooperate fully with International Atomic Energy Agency inspectors ``as a first step,'' read a statement delivered today by U.S. Ambassador to the International Atomic Energy Agency Gregory Schulte. ``Iran will face consequences if it does not meet its obligations.''
European Accusation
France, Germany and the U.K., the so-called EU-3 which has led the European Union's negotiations with Iran over the nuclear issue, said they believed that Iran's nuclear program has a ``military dimension'' and said there is a ``crisis of confidence'' in Iran's intentions. The Security Council may debate Iran ``later this month,'' the European countries said.
``Oil flow is continuing, and the exports will not be stopped,'' Vaziri-Hamaneh said, speaking through a translator. ``So far, there is no reason to change our position. We have no intention to reduce our exports.''
Concern that Iran would retaliate to possible UN sanctions over its nuclear program by cutting off exports sent crude prices to $69.20 in New York on Jan. 23, their highest in more than four months.
Refinery Repairs
Refineries operated at 82.9 percent of capacity, down 2.3 percentage points from the week before and the lowest since October. Units are often shut for maintenance in February and March as heating-oil demand falls and gasoline use has yet to rise. Some refiners deferred maintenance last fall because hurricanes shut facilities along the Gulf of Mexico states.
The profit margin or `crack' for turning three barrels of crude oil into two barrels of gasoline and one of heating oil is $9.38, based on futures prices in New York. The crack fell to $1.747 on Feb. 14, the lowest since Sept. 1994. The margin jumped to $28.761 on Sept. 1, the highest since at least 1990.
``The very low refinery runs are bullish for cracks,'' Cooper said. ``Refiners don't by crude oil to look at it. Once units are back on line we are going to see them produce a huge amount of petroleum products.''
Gasoline stockpiles fell 1.1 million barrels to 224.8 million, the report showed. Supplies are 6.4 percent above the five-year average. Inventories of distillate fuel, a category that includes heating oil and diesel, declined 2.7 million barrels to 131.4 million, leaving supplies 15 percent above average.
Gasoline for April delivery fell 0.24 cent to $1.631 a gallon in New York. Prices are up 6.3 percent from a year ago.
Heating oil for April delivery fell 3.72 cents, or 2.2 percent, to $1.685 a gallon in New York. Prices are 11 percent higher than a year earlier.
Last Updated: March 8, 2006 13:51 EST
|
|
