Sam Fletcher
Senior Writer
HOUSTON, Sept. 5 -- Futures prices for crude and heating oil fell in aggressive sales Thursday, following reports of unexpected large increases in US inventories last week.
However, unleaded gasoline for October delivery gained 1.19¢ to 85.28¢/gal on the New York Mercantile Exchange, in an expected market correction from Tuesday's plunge with the end of the US summer driving season.
The American Petroleum Institute reported late Thursday that US oil stocks rose by 1.9 million bbl to 284.8 million bbl during the week ended Aug. 29. Distillate inventories jumped by 2.5 million bbl to 122.7 million bbl, while US gasoline stocks were up by 396,000 to 194.7 million bbl, API said.
The US Energy Information Administration earlier reported commercial US oil inventories increased by 1.8 million bbl to 280.4 million bbl last week. US distillates stocks rose by 2.9 million bbl to124.7 million bbl, and gasoline stocks grew by 700,000 bbl to 191.9 million bbl (OGJ Online, Sept. 4, 2003).
Energy prices
In response to those bearish reports, the October contract for benchmark US light, sweet crudes dropped 51¢ to $28.98/bbl Thursday on NYMEX, while the November position lost 49¢ to $28.97/bbl. On the US spot market, the price for benchmark US oil was down by 65¢ to $28.88/bbl.
Heating oil for October delivery fell by 1.02¢ to 76.52¢/gal. However, the October natural gas contract gained 11.6¢ to $4.81/Mcf "on a steady stream of speculative buying" on NYMEX, said analysts Friday on Enerfax Daily. At first, they said, gas futures prices were "gyrating wildly in both directions" early in that session, following a "neutral" EIA report Thursday that natural gas in US underground storage increased by 70 bcf to 2.4 tcf last week (OGJ Online, Sept. 4, 2003). Initial reaction among traders was mixed since the EIA report "was largely around expectations."
US natural gas inventories "are now about 14% under 2002 levels and 7% below the 5-year average. To get to 3 tcf in storage by November, average weekly builds of 68 bcf are needed," analysts reported.
In London, the October contract for North Sea Brent oil fell by 43¢ to $27.31/bbl Thursday on the International Petroleum Exchange. However, the October natural gas contract inched up by 0.5¢ to the equivalent of $3.01/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes continued to decline Thursday, losing 17¢ to $26.69/bbl.
API defends prices
Through a flurry of press releases late Thursday, API officials moved to defuse a proposed Department of Energy investigation of the run-up in gasoline prices during August.
In a letter addressed to members of Congress, API Pres. Red Cavaney noted recent disruptions in the gasoline supply chain, including a pipeline rupture and the temporary shutdown of several refineries. The July 30 rupture of an 8-in. petroleum products pipeline between Tucson and Phoenix, Ariz., curtailed gasoline supplies to Phoenix through most of August (OGJ Online, Aug. 22, 2003), while the Aug. 14 power outage in the Northwestern US temporarily knocked out four US and five Canadian refineries (OGJ Online, Aug. 18, 2003).
"Additionally, the price of crude oil, the single largest component in the cost of gasoline, increased from $25/bbl in April to $32. This increase reflects the uncertainties in the marketplace over the continuing unrest in several oil producing areas and OPEC's lowered production levels," said Cavaney.
In a separate report on price trends, API said average US retail gasoline prices "were stable last week, falling by 0.1¢[/gal]. On Sept. 1, the nationwide average retail price, including taxes, for a gallon of regular grade gasoline was $1.746, 35.2¢ above the average price on Aug. 30, 2002."
It also noted "significant regional variations in gasoline price movements last week, with prices increasing substantially in New England (4.9¢/gal), the Central Atlantic (4.9¢/gal), and the Rocky Mountains (3.9¢/gal), while falling in the Lower Atlantic, Midwest, Gulf Coast, and West Coast" areas.
A third API release acknowledged that retail "gasoline prices over the last 2 weeks are at record highs for the year, averaging about 2¢/gal more than when they spiked in the spring, and 27¢/gal more than at the start of the summer."
However, when adjusted for inflation, "today's price is low compared [with] the historical record of pump prices over the last 85 years," API reported. For example, it said, the 1981 price of $1.35/gal for gasoline "is equivalent to spending $2.74 on a gallon of gasoline today."
Since 1981, "the real cost of motor gasoline to consumers has fallen by 95¢/gal," said API. "Only taxes have increased."
Current gasoline taxes total 42.7¢/gal, "including 18.4¢/gal in federal taxes and 24.3¢/gal in volume-weighted average state taxes. In comparison, when real pump prices were at their high in 1981, taxes were just 29¢/gal."
Yet another API release noted that US gasoline production last week jumped to more than 8.9 million b/d, "the second largest amount of gasoline produced in 1 week."
In a separate report Thursday, EIA said the US last week imported nearly 1.2 million b/d of gasoline, which it also described as "the second highest weekly average ever." In addition, EIA reported US demand for gasoline averaged a record 9.4 million b/d during the 4 weeks ended Aug. 29, up 1.2% from the same period a year ago (OGJ Online, Sept. 4, 2003).
Contact Sam Fletcher at [email protected]