MARKET WATCHGasoline price rises as supply falls

The front-month gasoline futures contract rose modestly Apr. 18 on the New York market after US gasoline supplies fell for the 10th straight week.

Sam Fletcher
Senior Writer

HOUSTON, Apr. 19 -- The front-month gasoline futures contract rose modestly Apr. 18 on the New York market after US gasoline supplies fell for the 10th straight week.

The Energy Information Administration said US gasoline stocks dropped 2.7 million bbl to 197 million bbl in the week ended Apr. 13. Due to a total drawdown of 30 million bbl over a 10-week period through that date, US gasoline supplies now are below average, just weeks before the start of the summer driving season.

"The market shrugged off bullish draws across the board and instead focused on the sharp rise in refinery utilization over the prior week," said analysts in the Houston office of Raymond James & Associates Inc. "Gasoline inventory levels, however, have fallen below the 5-year low and continued strong gasoline demand (firmly above the 5-year average) should keep the gasoline market tight."

Working capacity of US refineries rose 2 percentage points to 90.4% in the latest week, with the input of crude rising by 372,000 b/d to 15.4 million b/d. Gasoline production increased to 8.7 million b/d while distillate production declined to 4.2 million b/d. The US also imported 1 million b/d of gasoline during the latest week (OGJ Online, Apr. 18, 2007).

"The latest weekly US data shows another huge 4.4 million bbl draw in gasoline inventories east of the Rockies, masked somewhat by a 1.7 million bbl build on the West Coast," said Paul Horsnell at Barclays Capital Inc., London. "Gasoline inventories should now be at, or very close to, their second-quarter minimum, after which increases over the rest of the quarter would normally be followed by a resumption in inventory falls at the start of the third quarter. We expect that the usual seasonal pattern in [refining capacity] utilization and inventories is likely to beguile much of the market into the incorrect belief that the system is coming out of the woods. Heating oil inventories have fallen for the 13th straight week, a period during which they have fallen by a cumulative 22 million bbl, and they should now be pretty much close to their low for the year," Horsnell said.

Energy prices
The May contract for benchmark US sweet, light crudes inched up 3¢ to $63.13/bbl Apr. 18 on the New York Mercantile Exchange. The June contract, however, dropped 8¢ to $64.38/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 3¢ to $63.14/bbl. The May contract for reformulated blend stock for oxygenate blending (RBOB) traded at $1.98-2.09/gal before closing at $2.08/gal, up 2.75¢ for the day on NYMEX. Heating oil for the same week advanced 0.88¢ to $1.81/gal.

The May natural gas contract escalated by 7.9¢ to $7.50/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., increased 1.5¢ to $7.49/MMbtu. EIA reported Apr. 19 the withdrawal of 46 bcf of natural gas from US underground storage in the week ended Apr. 13. That was higher than the consensus of Wall Street analysts and compared with injections of 23 bcf the prior week and 57 bcf during the same period a year ago. US gas storage is now at 1.5 tcf, down 217 bcf from last year's level but 280 bcf above the 5-year average.

In London, the June IPE contract for North Sea Brent crude gained 11¢ to $66.04/bbl. The May gas oil contract fell by $15.50 to $570.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes lost $1.15 to $61.84/bbl on Apr. 18.

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