Top Financial News
Wed, 05 Apr 2000, 12:37pm EDT

Crude Oil Falls as Extra OPEC Supply Is Expected to Add to Inventories
By Stephen Voss

New York, April 4 (Bloomberg) -- Crude oil fell almost 4
percent to a 12-week low on expectations for more oil from the
Organization of Petroleum Exporting Countries during a lull in
demand for refined products.

OPEC members will boost output beginning this month to
replenish inventories and keep price gains in check. The supply
increase comes as demand for winter heating fuels declines and
before gasoline use climbs to a peak in the warm-weather months.
U.S. inventories probably rose last week, analysts said, and could
keep rising as OPEC oil arrives at refineries.
``The prospect for more barrels is very real, and I think
it's weighing on the market,'' said Andrew Lebow, senior vice
president and broker with ED&F Man International Inc. in New York.
``And we're now in the second quarter when it's a fact that demand
falls.''

Crude oil for May delivery fell 98 cents, or 3.7 percent, to
$25.45 a barrel on the New York Mercantile Exchange, the lowest
closing price since Jan. 10 and the biggest one-day drop in two
weeks.

Gasoline for May delivery fell 4.23 cents, or 5 percent, to
79.93 cents a gallon on the Nymex, the lowest price since Feb. 9
and biggest one-day drop since March 8.
``Prices are deteriorating'' as speculators exit the oil
market, said Nauman Barakat, vice president of global energy
trading at ABN Amro Inc. in New York. ``The bull rally for the
time being is over, especially with gasoline not being able to
rally.''

Oil prices are down 26 percent from a nine-year high of
$34.37 a barrel on March 8. Oil had peaked on concern that OPEC
wouldn't raise production enough to replenish U.S. inventories
that were close to January's 23-year low.

Worst Is Over

OPEC's decision last week to raise oil output means consumers
may have seen the worst of this year's rally in gasoline, U.S.
Energy Secretary Bill Richardson said on Friday. Just a month ago,
he said the U.S. was considering a release of oil from national
reserves to counter OPEC's yearlong restriction on oil production.

Average U.S. retail gasoline prices were at or close to
record highs above $1.50 a gallon throughout March amid forecasts
that costs nationwide would top $2 at the pump if unforeseen
mechanical problems at refineries kept motor-fuel output low.

And while average gasoline prices at the pump have fallen
about 2 cents in the past two weekly reports from the Energy
Department, prices could still rally if refiners don't boost
production rates enough, traders said.

Gasoline Focus

U.S. inventories of gasoline are 8.1 percent below year-ago
levels. Crude oil and heating oil supplies are below levels a year
earlier as well. The latest snapshot of U.S. supplies will come
today in a weekly report from the American Petroleum Institute,
due for release after floor trading ends. Analysts expected the
report to show higher crude oil supplies, and increased refinery
processing, though they were mixed on changes in gasoline and
heating oil inventories.
``The interesting thing will be the refinery operations,''
said Tom Blakeslee, an oil trader at Energy Merchant LLC in Bel
Air, Maryland. ``It's critical that these operations have stepped
up, otherwise you'll see growing concern about gasoline
stockpiles.''

Refineries ran at 90.4 percent of their capacity, the API
said in last week's report, down 3.9 percentage points from a year
earlier. Analysts expect a rise of about 0.6 percentage point in
tonight's report.

The combination of increased oil supply and lower demand will
probably push Nymex crude oil prices as low as $24 a barrel in the
weeks ahead, Lebow said.
``You still have to rebuild stocks and that's going to take
some time,'' he said. ``I don't see enough of an increase in
production to really get the market into a big surplus.''

Price Band

Oil producers probably will boost output again later this
year, OPEC President and Venezuelan oil minister Ali Rodriguez
said yesterday.

In the days following the Vienna OPEC meeting last week,
Rodriguez and other ministers outlined an informal plan to keep
prices between $22 and $28 a barrel by raising or lowering daily
output by 500,000 barrels if prices move out of the range.
``The idea is interesting, but not workable,'' said ABN
Amro's Barakat.

The range is based on an index of different types of crude
oil monitored by OPEC, which recently has traded within 50 cents
of Brent crude oil prices.

In London, Brent crude oil for May delivery fell 86 cents, or
3.5 percent, to $23.65 a barrel on the International Petroleum
Exchange, the lowest closing price since Jan. 7.

Heating oil for May delivery fell 2.90 cents, or 4.3 percent,
to 64.36 cents a gallon on the Nymex. Heating oil prices are down
almost 36 percent from a nine-year high of $1 a gallon at the end
of January.


-- Y2K Pro (y2kpro1@hotmail.com), April 05, 2000

Answers

with this from you....

"Refineries ran at 90.4 percent of their capacity, the API said in last week's report, down 3.9 percentage points from a year earlier. Analysts expect a rise of about 0.6 percentage point in tonight's report."

and this just a little earlier today from lurker.... Refiners asked to increase production (lurker, lurker@lurk.lurk, 2000-04-04)

"Richardson has said refiners need to operate at 98 percent capacity this spring to produce enough gasoline to meet summer demand. U.S. refinery utilization is currently at 92.2 percent, according to the Energy Department."

It's beginning to sound like we are in for a very long, very *dry* summer.

-- Ain't Gonna Happen (Not Here Not@ever.com), April 05, 2000.