Sam Fletcher
Senior Writer
HOUSTON, Mar. 24 -- Futures prices for crude and petroleum products rebounded Tuesday as US Energy Sec. Spencer Abraham told a Senate hearing that the administration plans to keep filling the Strategic Petroleum Reserve (SPR).
At a hearing on his department's annual budget request, Spencer said SPR additions had a "nearly negligible" impact on market prices and noted that the fill with oil taken as in-kind payment of royalties on offshore leases is "predicated on national security concerns."
Three US Senators—Charles Schumer, D-NY, Barbara Boxer, D-Calif., and Harry Reid, D-Nev.—called Tuesday for the administration to release SPR to increase supply and drive down prices.
The New York-based Petroleum Industry Research Foundation Inc. (PIRINC) earlier reported that a bipartisan political decision to fill SPR through the US Minerals Management Service's program to take oil, rather than cash, in payment for royalties on offshore leases, is not the cause of the run up of world oil prices (OGJ Online, Aug. 19, 2003).
In a report issued Wednesday, Michael Rothman and Steven A. Pfeifer, first vice-presidents and senior analysts at Merrill Lynch Global Securities Research & Economics Group, New York, noted that unnamed pundits who earlier predicted a collapse of oil prices to $18/bbl are now forecasting a retail price spike for US gasoline to $3/gal. "Frankly, such a drastic rise in average domestic retail prices in unrealistic, requiring the 'gas crack'"—the per-barrel spread between unleaded gasoline and crude oil, which is currently at $10.75/bbl—"to rise another $53/bbl from current levels or, alternatively, crude prices having to rally another $53 from today's price," they said.
"Our sense is that average US retail prices have no more than 10¢/gal upside risk from current levels," they said. That assumes "no change from current high crude prices, which, frankly, we view as being at an unsustainable high level," said the analysts.
US crude inventories increase
Meanwhile, the US Energy Information Administration said early Wednesday that commercial US oil inventories, excluding SPR, increased by 7.5 million bbl to 288.6 million bbl during the week ended Mar. 19. Those supplies remained 18.9 million bbl below the 5-year average for that time of year, however.
Gasoline inventories declined by 100,000 bbl to 199.5 million bbl last week, 8.5 million bbl below the 5-year average. US stocks of distillate fuels fell by 1.4 million bbl to 110.4 million bbl, with a drop in heating oil more than offsetting a small increase in diesel fuel.
Input into US refineries increased by 109,000 b/d to nearly 14.6 million b/d last week, with the biggest gain on the Gulf Coast. US imports of crude were up by 610,000 b/d to an average 10.1 million b/d. "Crude oil imports into the Gulf Coast increased by nearly 1.2 million b/d and at nearly 6.9 million b/d was the highest weekly average ever," said EIA officials.
Oil prices rise
The May contract for benchmark US light, sweet crudes increased by 40¢ to $37.45/bbl Tuesday on the New York Mercantile Exchange, while the June position advanced by 38¢ to $36.65/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 57¢ to $37.70/bbl.
Heating oil for April delivery jumped by 1.95¢ to 93.32¢/gal Tuesday on NYMEX. Gasoline for the same month rose by 1.77¢ to $1.1468/gal. Those gains were partly in reaction to reports of shutdowns at various refineries.
A fire Tuesday shut down the propane deasphalting unit of Sunoco Inc.'s 85,000 b/d refinery in Tulsa, Okla. The fire was isolated to that unit, which makes heavy industrial lubricants, and the rest of the plant was reported operating normally.
The Texas Commission for Environmental Quality reported Valero Energy Corp. planned to shut down a diesel hydrotreater unit at its 210,000 b/d Texas City, Tex., refinery for maintenance Tuesday, to be completed Wednesday.
The April natural gas contract dipped by 1.6¢ to $5.53/Mcf Tuesday on NYMEX. It was "propped up by a sharp rebound in crude oil futures, but a soft cash [natural gas spot] market and milder Northeast and Midwest weather forecasts this week kept the lid on tight," said analysts Wednesday at Enerfax Daily.
In London, the May contract for North Sea Brent crude increased by 51¢ to $33.31/bbl on the International Petroleum Exchange. Gas oil for April delivery gained $7.50 to $287.75/tonne. However, the April natural gas contract lost 1.3¢ to $3.68/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was up by 37¢ to $32.83/bbl Tuesday.
Contact Sam Fletcher at [email protected]
