By OGJ editors
HOUSTON, May 9 -- Crude oil futures prices rallied Wednesday after two weekly reports showed a decline in US inventories, driving the crude oil price on the New York Mercantile Exchange above $27/bbl. Resurgent Middle East hostilities also contributed to the price strength, with the prospect looming that Israel would launch military reprisals today against Palestinian strongholds in the Gaza Strip for another suicide bombing that left 15 dead in Israel Tuesday.
The Energy Information Administration late Wednesday reported crude inventories fell by 5.5 million bbl to 320 million bbl. Last Tuesday, the American Petroleum Institute reported US crude stocks declined by nearly 5 million bbl for the week ended May 3.
Paul Horsnell, an analyst with J.P. Morgan Securities Inc., in London said, "The US crude oil market has then swung from slack to tight in 2 months. We now expect the product markets to start a similar metamorphosis. The key will be the level of demand, and whether, as we expect, US demand will start to show its head above last year's levels."
He noted crude stocks in the US Midwest have continued to tighten. "They now stand at 64.1 million bbl, 5 million bbl below last year and 7 million bbl below normal."
Horsnell foresees US light, sweet crude futures prices as being well supported above $26/bbl for the coming months.
"Under the current dynamic, we still see two price paths as being the most credible. Our base case remains that WTI [West Texas Intermediate] prices spend most of the rest of this year between $25 and $29. The upside risk is that the knock-on effects of events on the West Bank and Iraq could yet force prices above $30," he said.
The June contract for benchmark US light, sweet crudes gained $1.22 to $27.85/bbl on NYMEX, while the July contract rose 85¢ to $27.01/bbl.
Unleaded gasoline for June delivery rose 0.49¢ to 78.77¢/gal on NYMEX. Heating oil for the same month gained 1.54¢ to 67.40/gal. The June natural gas contract added 7¢ to $3.74/Mcf.
In London, the June contract for North Sea Brent oil rose by 62¢ to $26.03/bbl on the International Petroleum Exchange. The June natural gas contract declined by 1¢ to the equivalent of $1.84/Mcf on the IPE.