Information on oil prices from the Noesis site:
oil-gasoline.com
Crude Oil
Crude Oil - Stocks increased slightly to 323.3 from 321.6 million barrels. Refinery utilization dropped to 91.2% of operable capacity. Most of the decrease occurred in the Gulf Coast region. Prices will continue downward. While the addition of more or Iraq's crude to the market is not a significant amount, in an already flooded market, every little bit added is another choice for the refineries, adding more pressure to producers to lower prices so they can maintain production rates.
Crude oil prices drifted lower this past week as the world realizes there is plenty of oil to choose from. While slow demand in the Asian countries may be contributing to the problem, the main factor is probably the lack of demand by U.S. refineries for crude oil. When refineries do not need crude oil, they post low prices (what they are willing to pay for various types of crude oil). This situation is only temporary. Due to high inventories of products, refineries, primarily in the Gulf Coast area, are reducing crude oil input to allow inventories to be drawn down. The drawdown will continue until there is adequate operating space in working tanks at the refineries. When refineries begin to post higher prices for crude oil, the price of oil on the international market is likely to turn.
Gulf Coast refineries collectively reduced input by 447 thousand barrels per day and concurrently saw a decrease in gasoline stocks, but not much decrease in distillate (heating oil and diesel) stocks. The balance is important, because refineries cannot ramp up for spring production of gasoline unless they can make room in inventories for distillate that is produced (cannot be avoided) when the gasoline is produced. If the situation is not corrected within the next few weeks, refiners will be forced to purchase imported gasoline to cover spring demand.
Assuming the refiners make all the right operating and product pricing decisions, they could be in position to increase refining utilization rates by April. When they begin making gasoline there will be high demand for light, sweet crude oil, which costs less to refine and makes more gasoline than distillate. The price of Saudi Arabian Light (34 API Gravity) reportedly hit a low of $12.00 this past week. United Kingdom Brent (38 API gravity) is $14.68; and West Texas Intermediate (WTI) is $13.75, down from $16.72 on Feb 6. WTI seems to be running a little high relative to the rest of the market, but may hold its price a little better than foreign crudes because of steady demand, preference by U.S. refiners, and lower delivery costs. PRICES WILL CONTINUE DOWNWARD UNTIL U.S. DEMAND PICKS UP, OR WORLD CRUDE OIL PRODUCTION RATES DECREASE. |
