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Oil prices shoot higher as gasoline worries grow
AFP
NEW YORK
Petroleumworld.com 04 13 07
Crude oil prices rallied Thursday as worries grew about tight supplies of gasoline in the United States ahead of the peak demand season.
New York's main oil futures contract, light sweet crude for delivery in May, jumped 1.84 dollars close at 63.85 dollars per barrel.
The price of Brent North Sea crude for May delivery added 88 cents to settle at 68.72 dollars per barrel in London.
The impact of a sharp drop in US motor fuel stocks and indications that demand was rising continued to impact the market a day after US inventory figures stunned traders.
"Nine straight weeks of gasoline supply drops and this one was a doozy," said Phil Flynn at Alaron Trading, citing the Department of Energy report showing a 5.5 million barrel drop in gasoline supplies.
"US gasoline supplies keep falling further and further behind the demand curve as refiners get ready to make their move to catch up. Can the refiners do it or will their big push be too little to late?"
The decline in inventories was far heavier than market expectations for a fall of 1.4 million barrels, and came ahead of the peak-demand season.
Flynn added: "The bottom line is that gas supplies are below normal. In the coming weeks it is going to take an awful lot of crude and an awful lot of good luck to get things back up to snuff."
Gasoline stockpiles are a critical focus before the so-called US driving season that starts next month and sees many Americans take to the roads for their holidays.
"Now we are going into the US driving season, everyone is looking at gasoline," CMC Markets trader Nas Nijjar said.
Meanwhile the International Energy Agency on Thursday urged the OPEC oil producers' group to increase production, saying in its monthly report that higher output was needed to build up world stocks.
The Organization of Petroleum Exporting Countries decided to cut its oil output twice at the end of last year to help stem falling prices.
"The IEA said output remains below sufficient levels necessary to produce the usual spring build in crude inventories," Davies noted.
"However, whilst the IEA is focusing on crude stocks, the real issue (driving prices) at the moment is the falling US gasoline inventories and tensions surrounding Iran's nuclear program."
Analysts fear that further UN sanctions against Iran, the world's fourth biggest producer of crude, could see the Islamic Republic disrupt oil exports.
The IEA, meanwhile, also tweaked its estimates of world oil demand for last year and 2007.
Demand in 2006 was estimated at 84.3 million barrels per day, a cut of 190,000 bpd from a previous estimate. The IEA forecast demand this year to be at 85.8 million bpd, a reduction of 250,000 bpd from a previous estimate.
AFP 12 1933 GMT 04 07
Copyright© 2007 AFP. All Rights Reserved.
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