Gasoline Rises to 2-Year High Amid Surge in Summer Driving, Inventory Drop By Mark Pittman
Gasoline Rises as Demand Soars; Crude Reaches $21 (Update5)
(Updates with closing prices.)
New York, July 29 (Bloomberg) -- Gasoline rose 3 percent to
its highest price in almost two years amid near-record demand
from vacationing motorists and the lowest inventories since
December.
''People must be flocking to the beaches,'' said Chester
Irvin, a trader at ABN Amro Inc. in New York. ''I drove down to
Maryland last weekend and the traffic was unbelievable. A five-
hour trip took me seven hours.''
Even U.S. pump prices at 21-month highs around $1.19 a
gallon haven't kept Americans off the road. Gasoline inventories
have fallen for seven straight weeks, leaving supplies at their
lowest level since Dec. 4.
Gasoline for August delivery rose 1.9 cents, or 3 percent,
to 64.98 cents a gallon on the New York Mercantile Exchange, the
highest closing price since August 1997. Gasoline futures have
gained 17 percent this month.
Strong demand is obvious on Long Beach Island on the New
Jersey shore, a popular vacation spot between Philadelphia and
New York City.
''This island is packed,'' said Brian Crappella, manager of
Brin's Mobil in Ship Bottom, New Jersey, which sells regular
gasoline for $1.16 a gallon. ''We're having a fantastic year.''
Crude oil rose to $21 a barrel for the first time since
November 1997, pulled higher by the rally in gasoline. Prices
retreated at the close. Crude oil for September delivery rose
43 cents, or 2.1 percent, to $20.97 a barrel on the Nymex after
rising as high as $21.12 a barrel.
In London, September Brent crude oil rose 46 cents, or 2.4
percent, to $19.80 a barrel on the International Petroleum
Exchange. It was the highest closing price for Brent since
November 1997.
Second Strong Week
An American Petroleum Institute report Tuesday indicated
that gasoline had its second consecutive week of demand above
9 million barrels a day, close to the record of 9.60 million
barrels a day set in March. Demand for gasoline is typically
about 3.5 percent a day higher between the end of May and early
September than it is the rest of the year.
Gasoline prices are also being boosted by speculation that
some refineries are having trouble producing fuel. Mobil Corp.
said an explosion and fire early yesterday shut a hydrogen plant
at its Los Angeles-area refinery, causing some units to operate
below full capacity of 160,000 barrels a day. The company did not
reveal how much the refinery was affected. Problems at California
refineries earlier this year boosted local prices and attracted
gasoline supplies from other parts of the country.
In addition, Exxon Corp. reduced operating rates on two
gasoline units at its 465,000-barrel-a-day refinery in Baytown,
Texas, due to mechanical problems, Bridge News reported, citing
people familiar with the situation. The Baytown gasoline units
represent about 2 percent of the nation's gasoline supply. The
company denied the reports.
This Year's Rally
Gasoline and crude oil prices have increased more than 70
percent this year on expectations that oil producers are reducing
a supply glut that built up during the past two years.
The Organization of Petroleum Exporting Countries together
with four other producers have promised to trim world output by
7 percent, or about 5 million barrels a day.
U.S. gasoline inventories fell almost 2 percent last week,
the API said, leaving supplies at 208.16 million barrels,
5 percent below a year ago. Crude oil inventories are 3 percent
below levels last year.
Since prices have risen back to $20 a barrel, traders
started watching for signs that OPEC would lift output levels to
raise much-needed revenue.
The may have a long wait. Government officials from OPEC-
member countries have pledged to keep the cuts in place until
next March.
Mexico, which is not an OPEC member but is participating in
the cuts, and Venezuela, OPEC's No. 3 producer, meet today and
tomorrow in New Orleans, and an OPEC subcommittee that monitors
oil output gathers tomorrow in Vienna.
Heating oil for September delivery rose 1.28 cents, or 2.5
percent, to 52.73 cents a gallon on the Nymex, the highest price
since December 1997. Tomorrow is the last day of trading for
Nymex gasoline and heating oil futures.
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