Sam Fletcher
Senior Writer
HOUSTON, June 28 -- Crude prices continued to creep higher June 27 amid concerns of a tight gasoline market and possibly record demand over the upcoming Fourth of July holiday in the US.
"Oil prices continue the recent upward trend as the closing of a vital ship channel in Louisiana continues to limit supply to three refineries, highlighting just how tight the oil market is," said analysts in the Houston office of Raymond James & Associates Inc. "Meanwhile, the July 4th holiday is just around the corner, and it is expected that summer travel, and therefore gasoline demand, will be at its highest, while gasoline inventories continue to build at a low rate."
An oil spill has restricted traffic along the Calcasieu Ship Channel for several days and curtailed production at refineries near Lake Charles, La. The US Coast Guard said the channel is expected to reopen by the end of this week (OGJ Online, June 27, 2006).
Gasoline stocks fall
Analysts generally were expecting government officials to report this week only a small build in US gasoline inventories. Instead, the US Energy Information Administration said June 28 that US gasoline stocks fell by 1 million bbl to 212.4 million bbl during the week ended June 23. Commercial US stocks of crude dropped 3.4 million bbl to 343.7 million bbl during the same period. However, distillate fuel inventories increased by 1.8 million bbl to 126.3 million bbl, including a large increase in heating oil and a gain in ultralow-sulfur diesel fuel.
Imports of crude into the US dropped by 448,000 b/d to 16.1 million b/d during that week. Input of crude into US refineries increased by 156,000 b/d to 10.5 million b/d, with refineries operating at 93.8% of capacity. Gasoline production dropped slightly to 9.3 million b/d while distillate fuel production increased to 4.2 million b/d.
Meanwhile, Ayatollah Ali Khamenei, Iran's supreme ruler, said there is "no use" in negotiating with the US over opposition to plans for a uranium enrichment program in that country. He also opposed postponing that program pending talks with five permanent members of the United Nations Security Council—China, France, Russia, the UK, and the US—along with Germany. The group had insisted that Iran postpone its program as a condition for negotiations about the trade incentive package offered by the UN.
US officials said they do not consider Khamenei's rejection to be Iran's final word on that subject, however.
Energy prices
The August contract for benchmark US light, sweet crudes gained 12¢ to $71.92/bbl June 27 on the New York Mercantile Exchange. The September contract rose by 6¢ to $72.80/bbl. On the US spot market, West Texas Intermediate crude at Cushing, Okla., was up by 12¢ to $71.92/bbl. Gasoline for July delivery increased by 1.97¢ to $2.20/gal on NYMEX. Heating oil for the same month, however, dropped 2.02¢ to $1.96/gal. The July natural gas contract regained 13.8¢ to $6.11/MMbtu.
In London, the August IPE contract for North Sea Brent crude advanced by 25¢ to $70.98/bbl. Gas oil for July rebounded by $12.75 to $637.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes jumped by $1.20 to $65.79/bbl on June 27.
Contact Sam Fletcher at [email protected].
