2000-01-18 15:29:50 EST

***SOME OIL PRICES APPROACH $1.00 GAL IN NEW YORK; NYMEX SURGES

1/18 - - (3:15 P.M. EST) -

Some heating fuels prices are approaching $1.00 gal in New York this afternoon as buyers continue to swarm looking for prompt material to meet the demands of the coldest sustained temperatures in four years.

Buyers for 55 grade kerosene, which is used for Winter diesel blends, were at 19cts gal over the NYMEX this afternoon. It was not clear whether they would find product at that number. NYMEX heating oil closed with a rush, with the February contract ahead 3.29cts gal to 77.1cts gal just prior to settlement. This put the value for low sulfur kerosene at about 97cts gal, nearly three times the value seen a year ago.

Heating oil has also surged to record post-Gulf War ground with buyers paying 5cts gal over the NYMEX, or about 82.1cts gal this afternoon. Low sulfur diesel prices are about 0.5cts gal higher at 82.6cts gal.

While the surge is primarily due to cold weather, it received a further midday boost from news that a large Venezuelan refinery might limp into February with less refined products output. That news helped send prompt N.Y. gasoline up to 2cts gal under the Merc with RFG even with the screen. Just prior to settlement, NYMEX unleaded gasoline was up 2.88cts gal at 77.4cts gal.

Gulf Coast prices tracked higher with New York, but there was a much less active pace of trading, with demand focused on downstream oil. Prompt heating oil at the Gulf moved at 1.65cts gal under the Merc, or about 75.5cts gal with diesel about 0.65cts gal higher. Gulf Coast gasoline hit 75cts gal, trading at 2.3cts gal under the February NYMEX.

- Tom Kloza, tkloza@opisnet.com

-- rocky (rknolls@no.spam), January 18, 2000

Answers

Hey Rocky thanks for the post...........

-- kevin (innxxs@yahoo.com), January 18, 2000.

I want to ask this question again:

When I purchased my prep kerosene last year -- 450 gallons worth -- I inquired of the wholesaler about annual fluctuations in kero prices, and was told that kero is manufactured only once per year, in anticipation of demand forecast and based on sales of the preceding year. Demand was anticipated to remain withi a narrow margin.

If this is true, I guess my questions are twofold:

1) When during the year is the kero usually refined?

2) If refinery problems are now cutting in to oil and gas production as reported, e.g. vis-a-vis Venz, how might this impact kero production? Would kero refineing be curtailed or postponed in favor of gasoline or is there a protocol for production out there that Downstreamer or RC could advise us of?

I must presume that kero refinign represents only a infinitesimal fraction of the whole petroleum market, and so it seems to me conceivable that a comparatively SHORT down-time (say 3-6 weeks at the beginning of the year, like the Amuay refinery is suffering now, could impact market like that A LOT.

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-- Squirrel Hunter (nuts@needa.newaddress), January 18, 2000.

One more question -- can anyone remember which thread it was, where someone reported thta they were stopping oil tankers at ports and samplking the cargo to determine chemical composition prior to offloading the product? Would appreciate a title or link .....

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-- Squirrel Hunter (nuts@upina.tree), January 18, 2000.

Hey. Squirrel Hunter. Kerosene is jet fuel. They make it constantly.

Also, what do you do with the tree rats when you get them?

-- pliney the younger (pliney@puget.sound.coldish), January 18, 2000.

Understand this is close to the truth, PTY: that jet fuel is "basically kerosene" with some additives to address water and lower the flashpoint. But there is a difference between a similar composition of products, and the colmplexity of technical processes that ultimately DO differentiate the two fuels. In other words, while there is a similarity, there is nowhere NEAR the demand for kero that there is for jet fuel, and nobody "JUST" puts kerop in their jet fuel tanks -- no matter how close the two may be.

That said, my third-hand info may still be accurate: dealer said kero is made one time per year. Which time? Beginning of the year?

By the way, did you see Rachel Gibson's post at the end of Carl Jenkins "UPDATE: Austrailan Aviation Fuel Crisis"????? Evidently the problem with 'contaminated" fuel persists, and a gel has been isolated in teh fule, which has yet to be idenitified. Huh??? A component in the fuel that must be lab tested (results will tkae a week, at least), suggests an origin in a problem completely novel, and one which may take some effort to correct.

Thanks, PTY.

>"<

-- Squirrel Hunter (nuts@needa.newaddress), January 18, 2000.

Note: Jet fuel is a knid of kerosene, but the avgas in Australia (and here) for small prop planes is what we used to call red gas, I.E high octane leaded, which is benzene.

-- Forrest Covington (theforrest@mindspring.com), January 18, 2000.

Sq Hunter,

Your dealer was probably right and wrong at the same time. His supplier may only make a production run on it once a year. Other refineries may produce as their marketing plans permit or allow. It really depends on the company and a given refinery.

-- RC (racambab@mailcity.com), January 18, 2000.