HOUSTON, May 24 -- Crude and gasoline futures prices rebounded slightly May 23 in the New York market as traders worried again about sufficient fuel supplies just days away from the 3-day Memorial Day weekend May 26-28 that marks the start of the US summer driving season.
"Crude oil prices gained modestly as gasoline inventories, reported in the Department of Energy's weekly petroleum inventories update, came in relatively in-line with expectations," said analysts in the Houston office of Raymond James & Associates Inc. "This week's report marked the third straight rise in US gasoline inventories; however, the sluggish return and string of refinery maintenance issues, combined with strong gasoline demand, has left gasoline inventories significantly below the 5-year average."
The Energy Information Administration said US gasoline stocks increased by 1.5 million bbl to 196.7 million bbl in the week ended May 18, still well-below average. Commercial US crude inventories rose by 2 million bbl to 344.2 million bbl (OGJ Online, May 23, 2007).
On May 24 Valero Energy Corp. said it shut down for maintenance a fluid catalytic cracking unit at its 158,000 b/d McKee refinery in Sunray, Tex., due to a problem with circulation of catalyst. "We are still evaluating the problem, but we expect the unit to be operating within 2 weeks. We expect that this will result in a loss of production of 30,000 b/d of gasoline and 3,000 b/d of jet fuel while the maintenance is ongoing. On the other hand, we will be able to increase production of ultralow-sulfur diesel at the plant by 11,000 b/d," said a company spokesman, adding, "We expect to reduce crude rates slightly to 80,000 b/d. This issue will not affect our plans to increase overall throughput at the plant to 150,000 b/d by the end of June."
Meanwhile, Jerry Taylor, senior fellow at the Cato Institute, said US motorists have no reason to worry about fuel costs this Memorial Day. "High [gasoline] pump prices are not reducing demand because they are not imposing anything like the economic pain politicians allege," he said.
Adjusting nominal 1949 gasoline prices of 27¢/gal for inflation, he said, "We get a price of $1.90/gal in today's terms. If we further adjust those prices by mean disposal income, we find that gasoline prices would have to be $6.68/gal before they were taking the same bite out of our wallets as they were in 1949. In 1962a year writ large in the popular imagination as the quintessential year of muscle cars and cheap gasoline thanks to [the movie] American Graffitigasoline prices averaged 31¢/gal. When disposable income is considered, today's gas would have to cost $4.48/gal to be a comparable burden."
Taylor said, "The public likewise thinks of 1972 as the last year of energy innocence prior to the rise of the Organization of Petroleum Exporting Countries and the onset of shortage. Fuel prices in 1972 averaged 36¢/gala hefty $2.77/gal in today's terms. While still high, this price is not all that different than the prices we were paying earlier in the year."
The new front-month July contract for benchmark US sweet, light crudes traded as high as $66.20/bbl May 23 on the New York Mercantile Exchange before closing at $65.77/bbl, up 26¢ for the day. The August contract gained 42¢ to $67.02/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 10¢ to $65.08/bbl. The June contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.41¢ to remain virtually unchanged at $2.31/gal. Heating oil for the same month advanced by 2.51¢ to $1.93/gal.
The June natural gas contract lost 4.4¢ to $7.76/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 6.5¢ to $7.55/MMbtu. EIA reported May 24 the injection of 104 bcf of natural gas into US underground storage during the week ended May 18. That was up from 95 bcf the previous week and 83 bcf during the same period last year. US gas storage now exceeds 1.9 tcf, down 205 bcf from year-ago levels but 334 bcf above the 5-year average.
In London, the July IPE contract for North Sea Brent crude escalated by $1.08 to $70.60/bbl. The June gas oil contract increased by $2.50 to $606.25/tonne.
The average price for OPEC's basket of 11 benchmark crudes gained 40¢ to $66.50/bbl on May 23.
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