<U.S. gasoline prices tumble as Chavez exits
NEW YORK, April 12 (Reuters) - U.S. oil prices fell heavily for the second straight day on
Friday as Venezuelan President Hugo Chavez' resignation eased disruptions at the key U.S.
supplier and brightened drivers' hopes for cheaper gasoline at the pump this summer.
May crude on the New York Mercantile Exchange plunged $1.52 to $23.47 a barrel, the
lowest price in five weeks and 18 percent down from recent six-month highs struck as
concern mounted over oil supply in both Latin America and the Middle East.
Fears of an oil spike that might derail economic recovery eased as signs emerged that
Venezuela will focus on lifting oil production instead of working with fellow producers in the
OPEC cartel to hold prices high.
"If the price of oil and production remains near the present level, economic consequences
should be manageable," Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.
Venezuela's Chavez resigned after at least 10 people were killed by suspected pro-Chavez
gunmen during a mass protest on Thursday. Businessman Pedro Carmona will lead a
transition government before an election.
Worries that prolonged protests could choke the Venezuela's crude and gasoline supply to
the United States evaporated as dissident employees at state oil company PDVSA headed
back to work on Friday and pledged to return exports to normal.
Venezuela is the No. 3 gasoline supplier and No. 4 crude supplier to the nearby U.S market
and last year accounted for 13 percent of petroleum imports in the world's largest fuel
market.
NYMEX gasoline prices clattered 6 cents a gallon lower to 72.96 a gallon, taking losses in
the last two days to more than 12 percent -- falls which will soon be felt at U.S. service
stations.
The national pump price has increased 27 cents a gallon, or 24 percent, since early March
to $1.413 a gallon, the Energy Department said late on Monday.
VENEZUELA/OPEC UNCERTAINTY
Falls accelerated as PDVSA's sales chief said the company should set its production
according to market conditions and not OPEC cartel's quotas.
"Let's not talk about quotas. Let's talk about the possibilities Venezuela has in the
petroleum business," said PDVSA's head of sales and refining Edgar Paredes.
When Chavez came to power in 1999 he ensured the Latin American producer cut output
to respect its OPEC limits after years of quota cheating.
"This is the end of an era," said Roger Diwan of Washington's Petroleum Finance Company
(PFC). "Clearly it hampers OPEC. The question is can OPEC cut efficiently now? It
depends where we are in six months from now in Venezuela in terms of the legal framework
and who's in power."
A heavy slide in Venezuelan output capacity during the Chavez years meant any new
government would have to bide their time before repeating pre-Chavez policy, analysts
said.
"They can't afford it. They have excess capacity and this transitional government is going
to need money," said PFC's Diwan.
OFF HIGHS
Crude prices now are sharply off the highs of Monday when Iraqi President Saddam
Hussein announced a month-long ban on exports in protest of Israel's military incursions
into Palestinian territories.
Prices topped $28 a barrel last week as speculators anticipated the Middle East conflict
might disrupt supplies, but hedge funds in the past two days have sold heavily to take
profits.
Leading OPEC supplier Saudi Arabia on Tuesday sent reassurances to the market, saying it
would guarantee world crude deliveries.
Dealers were keeping a close eye on Middle East developments as U.S. Secretary of State
Colin Powell failed to secure any firm timetable from Israeli Prime Minister Ariel Sharon for
an end to Israel's military offensive on the West Bank.
Dealers have found comfort in government data showing plentiful stocks in the United
States, the world's largest importer, where fuel demand has suffered from a slowdown in
commercial air travel since the Sept. 11 attacks on the United States.>
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The above had a lot to do with the big hits in the XOI, XNG and OSX yesterday. Am expecting more downside next week. Might get a little bounce first, but not sticking my neck out. High cash level in the energy portion of the portfolio been treating me pretty well the past week or more.
Have a good weekend, John. Cya Monday.
Best regards,
Isopatch |
