Sam Fletcher
OGJ Senior Writer
HOUSTON, Feb. 6 -- Oil futures prices continued to climb Wednesday as traders saw US-led forces moving closer to war with Iraq on the basis of evidence presented by Secretary of State Colin Powell to members of the United Nations.
Meanwhile, both the US Department of Energy and the American Petroleum Institute reported a plunge in US inventories of distillates for the week ended Jan. 31. DOE reported a drop of 10.3 million bbl to 112.1 million bbl for that period, while API put the loss at 8.7 million bbl to 114.4 million bbl total.
API also reported that US gasoline stocks fell by 2.97 million bbl to 208.8 million bbl, with US refineries operating at 84.9% of capacity, down from 86.7% the previous week. It said US oil inventories lost 79,000 bbl to 272.6 million bbl in the same period. DOE reported a drop of 3.4 million bbl in US gasoline stocks to 209.6 million but an increase of 1 million bbl in crude inventories to 274.3 million bbl (OGJ Online, Feb. 5, 2003).
"With total US crude and product stocks declining sharply for a second consecutive week to 668 million bbl, the lowest level since the fourth quarter of 2000, this week's DOE and API inventory data will further support the recent crude prices strength," said Matthew Warburton at UBS Warburg LLC, New York.
With refined products, particularly distillate, taking the brunt of that draw, he said Wednesday, refining margins and crack spreads should continue to strengthen as cuts in refinery runs diminish supplies. "This week, the market has begun to anticipate a much tighter gasoline stock position at the beginning of the driving season in April and an accompanying improvement in product prices and crack spreads," Warburton said.
"The recent improvement in margins may possibly spur some refiners to raise throughput," he said. "However, given the combination of turnarounds and low crude feedstocks, we would expect runs to remain subdued for several weeks to come."
Futures prices
The March contract for benchmark US sweet, light crudes gained 35¢ to $33.93/bbl Wednesday on the New York Mercantile Exchange. The April position increased by 36¢ to $33.27/bbl. Heating oil for March delivery jumped by 3.21¢ to 99.4¢/gal. Unleaded gasoline for the same month rose 3.09¢ to $1.03/gal.
However, the March natural gas contract lost 11.8¢ to $5.64/Mcf on NYMEX. "The market opened steady but soon started dropping as profit-taking accelerated, hitting a daily low of $5.565(/Mcf) in afternoon trading before rebounding somewhat on the close," analysts at Enerfax Daily reported Thursday. "The market has been supported by a strong cash market and cold weather, both in the Northeast and the West. Cash prices have hovered above $6/MMbtu over the last 2 days, well above first-of-month index averages."
Meanwhile, the US Energy Information Administration early Thursday reported 208 bcf of natural gas was withdrawn from US underground storage during the week ended Jan. 31. That's down from 247 bcf the previous week but up from 75 bcf during the same period a year ago. US gas storage now stands at 1.5 tcf, down 811 bcf from year-ago levels and 258 bcf below the 5-year average.
In London, the March contract for North Sea Brent oil increased by 27¢ to $31.36/bbl Wednesday on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 54¢ to $30.52/bbl Wednesday.
Contact Sam Fletcher at [email protected]
