Market watch: Energy futures mixed in anticipation of inventory adjustments

Energy futures prices were mixed Tuesday, as traders anticipated a bearish report on US inventories by the American Petroleum Institute after the markets closed. After many US refineries concluded spring maintenance programs in March, operations and gasoline production soared to the highest levels ever for April.


By the OGJ Online Staff

HOUSTON, May 16 -- Energy futures prices were mixed Tuesday, as traders anticipated a bearish report on US inventories by the American Petroleum Institute after the markets closed.

API officials said US crude inventories increased by nearly 2 million bbl to a total 322.5 million bbl last week. US gasoline stocks were up 2.4 million bbl to 203.3 million bbl, but distillate stocks unexpectedly fell by 2 million bbl to 102.6 million bbl.

After many US refineries concluded spring maintenance programs in March, operations and gasoline production soared to the highest levels ever for April, API officials said in a separate monthly report Wednesday.

US refiners reported average throughput of some 15.6 million b/d of crude during April, up 1.9% from the same period a year ago. Refiners were operating at 93.8% of their total capacity during the month, the highest utilization level since last September, officials said.

Refinery fires in Illinois and California had little impact on gasoline production during April. US refiners produced nearly 8.4 million b/d of gasoline during that period, 3.4% more than a year ago and 7.7% higher than in March.

API reported a sharp increase in production of the special reformulated gasoline required in California. But production of gasoline reformulated to Midwestern standards was down 9% from last year.

The June contract for benchmark US sweet, light crudes gained 27¢ to $28.98/bbl in regular trading Tuesday on the New York Mercantile Exchange. The July contract advanced by 22¢ to $29.35/bbl. However, both contracts declined to $28.81/bbl and $29.21/bbl, respectively, in after-hours electronic trading following release of API's weekly inventory report.

Unleaded gasoline for June delivery dipped 0.62¢ to $1.0036/gal Tuesday on the NYMEX in anticipation of increased inventory. Home heating oil for the same month gained 1.38¢ to 76.63¢/gal. The June natural gas contract jumped by 25.9¢ to $4.65/Mcf.

In London, the June contract for North Sea Brent crude lost 12¢ to $28.16/bbl Tuesday on the International Petroleum Exchange. However, it rebounded by 29¢ to $28.45/bbl in early afternoon trading Wednesday, with brokers there reportedly viewing the API report on US inventories as "generally constructive."

Brent crude appeared unlikely to fall below the $28/bbl mark or to rise above $29/bbl on the IPE over "the very near term," analysts said.

Crude oil prices in Tokyo also firmed Wednesday, rebounding with smaller gains after a softer start this week.

The June contract for natural gas gained 9¢ to the equivalent of $3.15/Mcf Tuesday on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes inched up 2¢ to $25.90/bbl Tuesday. OPEC ministers are scheduled to meet June 5 in Vienna to take another look at world oil markets and their production quota.

Democratic leaders in Congress called Tuesday for President George W. Bush to pressure OPEC members to increase oil production.

However, US Vice-Pres. Dick Cheney said OPEC can't be blamed for high gasoline prices in the US. "A big part of our difficulty today with respect to gasoline prices doesn't have anything to do with the price of crude," he said.

The problem is the shortage of US refining capacity, not a shortage of crude, said Cheney.

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