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December 25, 2002
U.S. Oil Supplies Rise; Venezuela Effect Is Seen on the Horizon
By NEELA BANERJEE
upplies of crude oil in the United States rose last week, despite dwindling oil exports from Venezuela, according to data released yesterday by the American Petroleum Institute, an industry trade group.
While the data may seem reassuring at first glance, analysts said it was too early to discount the impact of the Venezuelan shortfall on American oil supplies. Venezuela is the fourth-largest exporter of oil to the United States, accounting for 14 percent of United States oil imports. A general strike in Venezuela against the government of President Hugo Chávez has brought oil production there to a standstill, and exports have fallen to a trickle.
Industry analysts say that the full brunt of that stoppage is just beginning to be felt in the United States.
"I thought you would start to see the impact this week, but sometimes these things take a little while to work themselves through the system," said Thomas P. Bentz, senior energy analyst with BNP Paribas Commodity Futures. "There could be a lag time. It could be that we're not getting the full effect yet."
Crude oil stocks actually rose for the week ended Dec. 20 by 2.7 million barrels, to 286.63 million barrels. But the inventories were helped by a big jump in oil supplies on the West Coast, mainly California, analysts said, perhaps because crude oil shipments originally headed for Asia were diverted to the United States, where prices are higher.
Supplies on the Gulf Coast, where most of the oil from Venezuela is refined, were down by 1.84 million barrels, according to the trade group.
"If you excise the West Coast, there's an overall draw-down of oil by about 1.3 million barrels," said John P. Kilduff, senior vice president of energy risk management at Fimat USA, a unit of Société Générale. "It's the beginning of the problems with the Venezuela situation, and it will keep getting worse."
The price of oil for February delivery rose 22 cents yesterday, to close at $31.97 a barrel on the New York Mercantile Exchange. During trading, the price topped $32 a barrel, its highest level in 22 months. Traders are concerned not just about Venezuela but about the increasing possibility of war with Iraq and that conflict's impact on supplies from the region. The inventory data were released after trading ended.
Some analysts expect the price of oil to decrease only slightly, given the data, when trading resumes tomorrow. The exchange is closed today.
But Mr. Kilduff said he thought prices would remain at their current high levels.
"If the Venezuelan strike is still ongoing when we wake up Thursday, this will not be bearish for prices," Mr. Kilduff said. "When you break down the numbers and get behind the data, it will actually turn out to be bullish."
A key indicator that traders and analysts will be watching is the "run" rate at refineries, or how much of their capacity is being used to make petroleum products. At this time of year, when heating oil is in demand, refineries normally run at 93 percent or more of capacity, Mr. Kilduff said. But the data show that run rates have actually declined, to 88.7 percent, from 89.2 percent the previous week.
"The low refinery utilization number," Mr. Kilduff said, "is reflective of what refiners see as a problem with crude supplies."
Traders and refiners have said this week that refineries are scrambling to buy crude oil to make up for the Venezuelan exports. Two major refineries in the Caribbean that supply gasoline and other petroleum products to the United States have sharply reduced how much crude oil they process.
One of them, the Hovensa refinery in St. Croix, V.I., said it would increase output again in January, but a spokesman for a partner in the refinery, the Amerada Hess Corporation, said he did not know whether the plant would be able to operate at its capacity of 450,000 barrels of oil a day.
Refineries on the Gulf Coast have also reduced their output. Last Friday, Representative Billy Tauzin of Louisiana and the chairman of the House energy committee, sent a letter to the energy secretary, Spencer Abraham, urging the government to release oil from the strategic petroleum reserve because of the supply disruptions out of Venezuela.
In the letter, Mr. Tauzin said two major refineries that account for "approximately 10 percent of the market for refined products will run out of crude oil by the end of the month." Mr. Tauzin declined to identify the refineries, but analysts said they thought he was talking about two large refineries in Louisiana and Texas owned by Citgo.
Citgo is a subsidiary of Petróleos de Venezuela, the Venezuelan state oil company, and slightly less than half its crude oil supply comes from Venezuela.
A Citgo spokesman, Jim McCarthy, declined to comment on the possibility of the company's refineries running out of oil, saying only that "our traders are out there working as hard as they can to find crude to make sure that we don't have to cut back."
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