Market watch: Gasoline futures price jumps as inventory falls

Oil futures prices inched up on the New York market, buoyed by a price jump for gasoline futures while traders awaited additional signs of improved relations between the United Nations and Iraq.

Sam Fletcher
Senior Writer

HOUSTON, Oct. 25 -- Oil futures prices inched up Thursday on the New York market, buoyed by a price jump for gasoline futures while traders awaited additional signs of improved relations between the United Nations and Iraq.

US gasoline inventories now are below historical levels, and refiners have not been making up that shortfall for several weeks, analysts said.

The American Petroleum Institute earlier reported gasoline stocks fell by 2.9 million bbl to 197.2 million bbl last week (OGJ Online, Oct. 23, 2002). In the aftermath of Hurricane Lili, US refineries were operating at 87.2% capacity last week, up from 81.3% the previous week. They increased gasoline production by 236,000 b/d to 8.1 million b/d last week.

Unleaded gasoline for November delivery jumped 2.77¢ to 84.17¢/gal Thursday on the New York Mercantile Exchange, topping a gain of 1.55¢ on Wednesday. However, those gains do not make up for a combined loss of 5.32¢/gal during the first two trading sessions this week, starting with a drop of 4.14¢ Monday.

The December contract for benchmark US light, sweet crudes increased by 2¢ to $28.20/bbl Thursday on NYMEX, while the January contract inched up 1¢ to $27.79/bbl. November heating oil gained 0.3¢ to 75.97¢/gal.

The November natural gas contract fell 12.7¢ Thursday to $4.13/Mcf in volatile trading on NYMEX, as a "rather bearish storage report triggered early selling, followed by a run of heavy buying and selling again," said analysts at Enerfax Daily. "The market opened higher in anticipation of a lower storage injection number, then fell off steadily until it bounced off $4.085(/Mcf)."

Enerfax analysts reported, "Sinkhole gaps in bidding, caused by the very illiquid market, have baffled and frustrated marketers. With many of the major players no longer playing because of credit issues, debt ratings, (and) bankruptcies, the market has taken on a much less predictable volatile nature." However, analysts said, "The technicals are beginning to look weak and could influence the market if there is a break in the cold weather forecasts."

Meanwhile, Ronald Barone at UBS Warburg LLC, New York, said Thursday, "One has to wonder if El Niño will have a meaningful effect on US temperatures this winter, given continued cooler-than-normal fall conditions and the reality that most heating region furnaces (already) are well broken-in prior to the official Nov. 1 start of the heating season. Not surprisingly, heating degree-day temperatures were 36% colder than normal and 26% colder than last year for the week (ended) Oct. 19. Beyond another batch of chilly conditions this week, near-term forecasts are suggesting solid heating demand for the balance of October."

As a result of recent cool weather combined with a major portion of gas production in the Gulf of Mexico being shut in by recent storms, natural gas injections into US underground storage fell to 33 bcf last week from 48 bcf the previous week (OGJ Online, Oct. 24, 2002). "With temperatures across key US heating markets continuing to average well below normal thus far this week, we would not be surprised to see an even lower injection figure reported next," said Barone.

"Despite bloated storage supplies," he said, "natural gas spot prices rebounded last week with the arrival of solid fall heating demand."

In London, brokers said futures prices for North Sea Brent oil seemed to be stabilizing around $26.50/bbl on the International Petroleum Exchange, as traders looked for fresh news in US-Iraq relations. The December Brent contract closed at $26.46/bbl Thursday, down 5¢ for the day after trading in a range of $26.36-26.82/bbl.

The November natural gas contract gained 5¢ to the equivalent of $3.64/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes gained 12¢ to $26.74/bbl Thursday.

Contact Sam Fletcher at samf@ogjonline.com

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