Oil Surges; U.S. Fuel Demand Saps Supplies
Thu Apr 8, 2004 01:47 PM ET
NEW YORK (Reuters) - World oil prices surged again on Thursday, building on the previous day's gains, after a sharp fall in U.S. fuel inventories and galloping gasoline consumption stoked fears of a summer supply shortfall.
U.S. benchmark West Texas Intermediate crude futures (CLc1: Quote, Profile, Research) were at $37.00 a barrel, up 85 cents, or 2.4 percent, with about an hour left in Friday trading at the New York Mercantile Exchange.
In London, benchmark Brent crude futures (LCOc1: Quote, Profile, Research) rose 62 cents a barrel to $33.10, up 1.9 percent.
Both markets gained more than a $1 on Wednesday after U.S. official data showed a 2.1-million-barrel fall in crude inventories and an 800,000 barrel dip in gasoline stocks at a time when inventories should be rising before the summer driving season.
The rally helped recoup losses from last week, when it appeared stocks were finally building steadily despite OPEC's decision to go ahead with output cuts starting April 1.
Prices have surged about 8 percent in the last three days.
"The stocks turned expectations on their heads, flipping market sentiment from slightly bearish to bullish in nanoseconds," Societe Generale wrote in a note. "The key is the near-feverish demand for gasoline and diesel."
The fall puts U.S. gasoline stocks at one of the lowest levels in 30 years for this time of the year.
"The gasoline market is now on the precipice of a serious supply problem," said Barclays Capital in a report.
Analysts were also stunned by the 4.5-million-barrel drop in distillate stocks -- the biggest fall for this time of the year in over 20 years, signaling strong diesel demand from the trucking sector on the back of a recovering U.S. economy.
Strong demand growth -- over a month before the U.S. driving season kicks off -- has revived fears of a supply crunch during peak demand summer, when gasoline consumption is expected to hit a record 9.32 million bpd, up 2.2 percent from last year.
Barclays said that even if the U.S. government agreed to waive requirements for cleaner-burning fuels, supply was unlikely to keep pace with demand. A top energy official also said the waivers would have little bearing on supply or prices.
"In the short run, a waiver this summer would not have much of an impact, because the refineries and distributors of gasoline have already made their configurations" to make summer motor fuel, said Guy Caruso, administrator for the U.S. Energy Information Administration (EIA).
Prices on European gasoline markets, a key supply source for the United States, have leaped to four-year highs. The EIA warned on Thursday that U.S. consumers could expect to pay a record average $1.76 a gallon for gasoline this summer, 20 cents above last year.
Rising consumption and threadbare stocks are accompanied by escalating violence in Iraq, potentially threatening the country's nearly 2 million barrels per day of exports. Battles are raging in several cities between U.S. troops and Iraqi rebels. |
