Thursday June 29, 5:35 pm Eastern Time

U.S. oil surges on early winter supply worries

NEW YORK, June 29 (Reuters) - Worries about thin heating oil stocks well ahead of winter pushed U.S. oil prices back up within sight of record highs on Thursday.

Fresh buying pulled up crude oil for delivery in August by 82 cents to $32.72 a barrel on the New York Mercantile Exchange (NYMEX), within two dollars of nine-year highs recorded in March.

Analysts said prices could go higher, despite word from ministers in the Organisation of Petroleum Countries (OPEC) they would move to pump more oil again if high prices persist.

Traders stepped up buying after an official of the U.S. Energy Information Administration (EIA) told a Senate panel distillate stocks, the bulk of which are heating oil, are currently well below normal.

Heating oil prices also soared to fresh contract highs, with product deliverable this July rising nearly three cents to 84.80 cents a gallon.

``Even with a normal inventory build during the summer and early fall, we will enter the winter with lower-than-normal stocks,'' said John Cook, director of EIA's Petroleum Division.

Cook also said U.S. crude stocks are already thin and even a normal build up in inventories will not help the gasoline market much this summer.

Cook's testimony confirmed buzz in oil trading circles in recent days that a heating oil crunch was in the offing. Even with more barrels coming from OPEC, American drivers will still have to pay high gasoline prices this summer.

Concerns about about a repeat of the heating oil squeeze in the U.S. Northeast last winter compelled U.S. Energy Secretary Bill Richardson to ask Congress on Wednesday to create an emergency reserve to cover for any supply disruptions in the upcoming winter.

On the gasoline front, the Federal Trade Commission (FTC) has issued subpoenas to refiners in its investigation into the reasons behind their recent spike in the Midwest to more than $2 a gallon.

But gasoline prices are gradually moving down and the market's concern has suddenly shifted to heating oil, well ahead of the cold weather season.

``Might as well, it's too late to do anything about gasoline now,'' said a New York oil trader.

In the share markets, shares of independent oil and gas produces and refiners gained, alongside those of oil service companies, while Big Oil stocks slipped a bit.

Among the gains were Apache Corp.(NYSE:APA - news), Burlington Resources (NYSE:BR - news), Anadarko Petroleum (NYSE:APC - news) and Kerr-McGee (NYSE:KMG - news), which all rose more than a dollar.

Texaco (NYSE:TX - news) led Big oil losers as it ended at 53-13/16, down 1-3/16.

Among oil drillers, Halliburton (NYSE:HAL - news) gained 2-4/1 to close at 48-7/16.

--

http://biz.yahoo.com/rf/000629/n29229847.html

-- Cave Man (caves@are.us), June 29, 2000

Answers

Here's my wild conspiracy theory on high oil prices: oil is being consumed faster than it can be pumped out of the ground.

-- Cave Man (caves@are.us), June 29, 2000.

HM? GOD SAID TRUST HIM,FOR MY DAILY BREAD!!nuthin about trust in oil! al-d.=free from cares of this world!!

-- al-d. (dogs@zianet.com), June 29, 2000.

June 29, 2000

 DOW JONES BUSINESS NEWS Hot Heating-Oil Futures Ignite Broad Energy Rally

NEW YORK -- The price of heating oil climbed to a five-month high Thursday, sending crude-oil and gasoline futures higher as well, after a government official warned that distillate supplies will be too low for the winter. Natural gas contracts also advanced after falling sharply Wednesday.

At the New York Mercantile Exchange, July heating oil jumped 2.88 cents, or 3.5%, to settle at 84.47 cents a gallon. Earlier, it climbed to a new contract high of 84.80 cents, the highest level for a front-month contract since the mid-January price spike in heating oil prices.

The rally was sparked by a Department of Energy official, who said the DOE is concerned that natural-gas and distillate stocks aren't building enough to meet winter demand. John Cook of the DOE's Energy Information Administration told Congress that distillate stocks, which currently stand about 27 million barrels below last year's levels, will be lower than normal for the winter.

Distillate stocks, which include heating oil and diesel fuel, typically grow during slack summer months. But unseasonably strong demand and refiners' single-minded focus on gasoline production have prevented stocks from rebuilding.

Thursday's testimony by Mr. Cook, director of the EIA's petroleum division, "awakened some participants that the year-on-year deficit isn't insignificant," said John Kilduff, a senior vice president for Fimat, U.S.A.

The surge in heating oil was strong enough to pull gasoline higher. After spending all morning deep in negative territory, July gasoline settled up 1.61 cents, or 1.6%, at $1.0505 a gallon.

Gasoline ended higher despite continuing political pressure to blunt soaring gasoline prices. The Wisconsin Assembly, along with several local governments, announced that it would seek an injunction that would free several counties from an Environmental Protection Agency requirement to sell cleaner-burning reformulated gasoline.

August crude oil jumped 82 cents, or 2.6%, to finish at a new contract high of $32.72 a barrel. September crude climbed 60 cents, or nearly 2%, to end at $31.25 a barrel.

Also on the Nymex, July natural gas rose 2.6 cents to settle at $4.423 per million British thermal units after plunging 32 cents Wednesday.

The energy market shrugged off an announcement by Norway that it will lift its 100,000 barrel-a-day output restriction in the third quarter. The move is largely symbolic, as Norway this year has yet to meet its previous, lower production target of 3.3 million barrels a day.

Norway is the second oil producer outside the Organization of Petroleum Exporting Counties to announce plans to boost production after OPEC agreed last week to raise output by 708,000 barrels a day. Mexico has said it will increase production by 75,000 barrels a day.

"With solid demand for crude, it's not enough in the short-term," Fimat's Mr. Kilduff said.

http://dowjones.wsj.com/i/ener/SB962308865644667016-d-industry-c1-ener .html

-- Cave Man (caves@are.us), June 29, 2000.

Your conspiracy theory is probably mostly right, it could be a 100% right.

The Saudi's will raise prices again.. after this shock is over. Itprobably will become more of a case of the US$ value vs oil at some point. IMHO.

-- Will (righthere@home.now), June 30, 2000.

Shrubya friends in the earl bidness are purposely saying their inventories are low so they can keep the prices at the pumps nice and high. Blame it on the current administration so that people will get fed up and vote for the Shrubster. Then when he gets in office he'll deregulate the industry, prices will go down, and everybody will be happy. Wouldn't be suprised to see him send the bombers into Iraq again just like Daddy Bush did to blow the piss out of their supply, further increasing the need for more drilling on American soil.

-- Hawk (flyin@hi.again), June 30, 2000.

Ditto, Hawk.

-- FutureShock (gray@matter.think), June 30, 2000.