Sam Fletcher
Senior Writer
HOUSTON, Feb. 26 -- Energy prices jumped Wednesday following a government report of a larger-than-expected drawdown of US gasoline inventories during the week ended Feb. 20.
US gasoline inventories dropped by 1.6 million bbl to 203.4 million bbl last week, the US Energy Information Administration said Wednesday (OGJ Online, Feb. 25, 2004). US commercial crude inventories remained unchanged—a rare occurrence—at 273.8 million bbl in the same period, EIA said. The American Petroleum Institute subsequently reported US crude stocks fell by 27,000 bbl to 274.5 million bbl during the week ended Feb. 20, while gasoline stocks increased by 447,000 bbl to 202.6 million bbl.
Following the release of the EIA report early Wednesday, the April contract for benchmark US light, sweet crudes surged by $1.10 to $35.68/bbl on the New York Mercantile Exchange, with the May contract gaining 88¢ to $34.33/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also jumped by $1.10, the same as the April futures contract, but to a higher level of $37.18/bbl.
Gasoline for March delivery shot up by 3.45¢ to $1.0589/gal Wednesday on NYMEX. However, heating oil for the same month rose by an even higher rate, up 4.42¢ to 93.39¢/gal.
Distribution problems
Tight US gasoline inventories "continue to be the primary factor" in support of higher oil prices, said Robert S. Morris at Banc of America Securities LLC, New York, in a separate report. Total US refinery utilization decreased to 87% during the week ended Feb. 20, vs. 90% the previous week, he said. Other outages have since been reported.
The current related spike in US retail gasoline prices "is another symptom of a general malaise within the US energy distribution system," said Paul Horsnell, head of energy research, Barclays Capital Inc., London.
"The problem has arisen from a series of dislocations after a decade of low returns and hence low investment," he said. "Other issues include the multiplication of gasoline specifications and the resultant loss of supply flexibility, for instance whether it really makes sense for states to have primacy in the setting of gasoline standards, and whether the shift to ethanol in gasoline blends is more in the interests of corn farmers or gasoline consumers."
Natural gas
The March natural gas contract increased by 7.3¢ to $5.15/Mcf Wednesday on NYMEX, "driven by a sharp rally in crude oil futures and some short-covering [of open sales contracts] ahead of expiration, despite mild weather this week," said analysts Thursday at Enerfax Daily. The April natural gas contract jumped by 13.7¢ to $5.22/Mcf, while "gains in summer months far outpaced March's advance," they said.
Early Thursday, EIA reported the withdrawal of 164 bcf of natural gas from US underground storage during the week ended Feb. 20, well above the previous expectations of most Wall Street analysts. That was down from 172 bcf the previous week but up from 154 bcf a year ago.
US gas storage is now less than 1.3 tcf, up by 253 bcf from year-ago levels but 163 bcf below the 5-year average, officials said.
In London, the April contract for North Sea Brent crude closed at $31.57/bbl Wednesday, up 76¢ for the day on the International Petroleum Exchange after trading between $30.70-$31.79/bbl. That market was looking for bullish news to push prices out of the narrow range in which they had recently been stuck, said brokers.
Gas oil for March delivery gained $9 to $268.50/tonne. The March natural gas contract increased by 2.9¢ to the equivalent of $4.09/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 34¢ to $30.89/bbl Wednesday.
Contact Sam Fletcher at [email protected]
