Tighter oil supplies in April boosted crude and gas prices

By OGJ editors

HOUSTON, May 17 -- Tightening US supplies of crude and petroleum products in April helped boost prices for both oil and natural gas, government and industry analysts reported.

US deliveries of all major petroleum products fell from year-ago levels in April for the second consecutive month, said officials at the American Petroleum Institute, Washington, DC.

"Gasoline deliveries, which had shown increases earlier in the year, dropped 0.7%, repeating their March decline. The decreases for distillate and jet fuel, however, moderated from their first quarter declines," officials said Wednesday. "Still, for petroleum products overall, domestic deliveries for the year to date have fallen more than 3%."

The "lackluster" US demand for gasoline during the first 4 months of 2002 "was due to sharply higher retail gasoline prices in March and April, when some slight pump price declines set in to average 10% lower than a year ago," API reported.

Political upheaval in Venezuela and escalating violence in the Middle East did not interfere with crude imports into the US during April, as some had feared, said API officials. US oil imports totaled 11.6 million b/d during April, up by nearly 1 million b/d from March but down 6.1% from the same period a year ago.

US imports of gasoline jumped to 860,000 b/d in April, 11% more than last year and the largest amount since last summer. But API reported imports of other refined products were down.

Partly as a result of recent strengthening of world oil prices, Lehman Bros. Inc., New York, earlier raised its natural gas price forecasts by 25¢ to an average $3/Mcf for 2002 and by 50¢ to $3.50/Mcf for 2003. That move also was stimulated by a sharp decline in US gas production during the first quarter of this year and strong 30-day May "bid week" prices that averaged $3.35/Mcf, said Lehman analysts.

"Oil prices have helped us to survive a dangerous [natural gas] storage situation," Lehman Bros. reported. "Several months ago we had feared that a springtime oil price of $19-20/bbl could cap natural gas prices at $2-2.50/Mcf. We continue to believe that natural gas prices will be limited by residual fuel oil prices over the next 6 months. If crude oil were to fall into the low $20s[/bbl] range, we believe that natural gas prices could be forced down into the mid-$2s[Mcf] range."

However, analysts said, "Dynamics may change going into winter; a tighter gas market could allow gas producers to achieve selling prices higher than residual fuel oil parity, if the market tightens by more than 1-1.5 bcfd."

The US Energy Information Administration reported Thursday that 55 bcf of natural gas was injected into US underground storage during the week ended May 10. The total amount of working gas in US storage was estimated at 1.657 tcf, up 500 bcf from the same period last year and 330 bcf above the 5-year average of 1.327 tcf.

That included injections of 35 bcf in the eastern US region, with gas storage 91 bcf above the 5-year average. In the so-called producing region of the US, there was a net injection of 16 bcf, pushing storage there to 183 bcf above the 5-year average. In the west, an additional 4 bcf was injected last week, putting gas storage in that region 57 bcf above the 5-year average, EIA officials said.