Sam Fletcher
Senior Writer
HOUSTON, June 4 -- Gasoline and oil futures prices jumped June 1 amid continued concerns that US refineries aren't producing enough fuel to meet peak summer driving demand.
The US Energy Information Administration earlier reported US gasoline stocks increased more than expected—up by 1.3 million bbl to 198 million bbl in the week ended May 25—but were still well below average for the summer driving season that began May 26-28. During that same period, total US gasoline imports averaged 1.6 million b/d, the third-highest weekly average ever. Input of crude into US refineries dropped by 76,000 b/d to 15.6 million b/d and utilization rates of refineries in the US remained relatively flat at 91.1% of capacity (OGJ Online, June 1, 2007).
Crude prices were little changed in early trading on June 4 "on mixed news from Nigeria," said analysts at the Houston offices of Raymond James & Associates Inc. On one hand, they said, six Chevron Corp. workers, who had been held hostage since May 1 were released over the weekend, and Nigeria's main militant group promised to stop attacking that country's oil infrastructure for a month. Nevertheless, four Schlumberger employees were taken from their compound in southern Nigeria.
Oil prices started last week with a sharp drop resulting from an apparent easing of both global geopolitical tensions and recent refinery problems. However, oil prices rallied at the end of the week on reports that a Midwest refinery will not be back at full capacity until the end of summer. "Otherwise, last week's economic data was somewhat mixed," said Robert S. Morris, Banc of America Securities LLC, New York.
Meanwhile, Raymond James analysts said, "With the Organization of Petroleum Exporting Countries itself struggling to bring fresh capacity online, overall growth in global oil supply appears barely sufficient to keep up with demand, let alone increasing excess capacity." Nor does it appear that non-OPEC producers will contribute any meaningful supply additions, given the mature characteristics of most of those fields. "Indeed, a permanent non-OPEC peak seems likely in the next 5-10 years," they reported, adding, "Non-OPEC growth is highly dependent on Russian growth and, given the current policy environment, Russia is unlikely to post the growth it experienced in the early part of this decade."
Raymond James analysts said, "The world is likely to continue in an environment of a wafer-thin excess capacity 'cushion' for the foreseeable future. Given this tight supply-demand equation, threats of even minor supply disruptions are bound to have a large impact on already volatile oil prices, and the oil markets look set to continue to price in a substantial geopolitical risk premium."
Energy prices
The July contract for benchmark US light, sweet crudes gained $1.07 to $65.08/bbl June 1 on the New York Mercantile Exchange. The August contract climbed $1.13 to $66.12/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.07 to $65.09/bbl. The July contract for reformulated blend stock for oxygenate blending (RBOB) escalated by 4.14¢ to $2.24/gal on NYMEX. Heating oil for the same month increased 3.97¢ to $1.92/gal.
The July natural gas contract dropped 5.07¢ to $7.88/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., fell 19.5¢ to $7.55/MMbtu.
In London, the July IPE contract for North Sea Brent crude increased by $1.03 to $69.07/bbl. The June gas oil contract gained $4.25 to $592.25/tonne.
The average weekly price for OPEC's basket of 11 benchmark crudes increased by 13¢ to $64.47/bbl on June 1. So far this year, OPEC's basket price has averaged $58.37/bbl vs. $61.08/bbl for all of 2006.
Contact Sam Fletcher at [email protected].