Oil prices surge (Bloomberg)

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Oil prices surge

SUPPLY DWINDLES: Both heating oil and gasoline supplies will keep falling, as refiners operate at their lowest processing rates since 1993, analysts said.

Friday, February 11, 2000

Bloomberg Business News

NEW YORK - Crude oil rose more than 2 percent, and gasoline jumped to a nine-year high, on concern that U.S. oil inventories close to 23-year lows could cause shortages of refined products in the months ahead.

While oil ministers from Saudi Arabia, Venezuela and Mexico are set to propose a "modest" increase in production when an output-limiting agreement expires at the end of next month, that won't help supplies now, traders said. Both heating oil and gasoline supplies will keep falling, as refiners operate at their lowest processing rates since 1993, analysts said.

"It's still a bull market," said Tom Blakeslee, an oil and gas trader at Eildon Marketing LLC in White Marsh, Md. "OPEC's going to try to ease prices, but it's a Greenspan-type play - like raising interest rates by a quarter point - to bring the market back slightly."

Crude oil for March delivery rose as much as 71 cents, or 2.5 percent, to $29.48 a barrel on the New York Mercantile Exchange. It was the highest intraday price since Jan. 20, when oil rose to a nine-year high of $29.95. Prices are up 15 percent since the start of the year.

Gasoline for March delivery rose as much as 1.84 cents, or 2.3 percent, to 81.50 cents a gallon on the Nymex, the highest price for a contract closest to expiration since January 1991.

In London, Brent crude oil for March settlement rose as much as 65 cents, or 2.4 percent, to $27.57 a barrel on the International Petroleum Exchange.

U.S. gasoline inventories stand at 200 million barrels, the American Petroleum Institute said, 13 percent lower than a year ago and an unusually low level for this time of year, when refiners usually build up supplies for the peak period of demand when the weather gets warmer.

"Inventories are okay for right now. The bullish potential is for later on because we haven't had the seasonal build in stocks that typically we have over the winter," said Tim Evans, senior energy analyst at Pegasus Econometric Group in New York. "That leaves us without a cushion as demand picks up in the spring and summer."

Refinery utilization unexpectedly dropped 3.3 percentage points last week to 84.4 percent of normal capacity, its slowest rate in seven years, the API said. Gasoline demand will be a record this year, government economists predict.

A meeting of oil ministers from Saudi Arabia, the world's top producer, Venezuela and Mexico early next month will come just weeks before the Organization of Petroleum Exporting Countries gathers in Vienna to discuss whether to renew their agreement to keep oil output low. The agreement sparked a doubling of prices over the past year.

-- Homer Beanfang (Bats@inbellfry.com), February 11, 2000


It can't possibly be refinery problems. That might imply embedded systems failures. No, this report is all wrong. It's OPEC and cold weather causing this.

So who is Bloomberg, and how big a voice is he? Nice to hear something besides network lies.

-- cynical (citizen@most.of.the.time), February 11, 2000.

Am I missing something here? If oil prices are up "only" 15% since the beginning of the year, why is home heating oil up by over 100%?


-- Jimmy Splinters (inthe@dark.com), February 11, 2000.

I actually heard someone postulate on the radio the other night that the heating oil/diesel shortage was due to two factors: (a) OPEC, of course, and (b) because we've had a couple of mild winters where refineries produced an oversupply, this year refineries cut back production of heating oil so that they could boost production of gasoline in preparation for a potential Y2K scare. Reading between the lines, the shortage and skyrocketing prices of heating oil and diesel are because of Y2K fear-mongers. (Doesn't explain why gasoline prices have gone up, but why let facts get in the way of a plausible theory?)

-- Markus Archus (markus@archus.com), February 11, 2000.

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