Crude Oil Jumps Above $58 on Signs U.S. Fuel Use Will Increase
By Mark Shenk
Jan. 31 (Bloomberg) -- Crude oil surged above $58 a barrel in New York on speculation that U.S. fuel demand will jump because of increased economic growth and cold weather.
Fuel consumption grew and refinery operations fell for a third-straight week, an Energy Department report showed today. Refiners shut units as they performed maintenance before gasoline demand picks up this summer, the report showed. The nation's economy grew at a faster-than-forecast annual pace of 3.5 percent last quarter, the Commerce Department reported.
``Refineries are going into turnarounds soon, which will put pressure on the gasoline market,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The forecasts are for frigid weather through the month of February. If the forecasts pan out, the overhang in distillate and natural-gas inventories will be burned off.''
Crude oil for March delivery rose $1.12, or 2 percent, to $58.09 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $58.20, the highest since Jan. 4. Prices are 15 percent lower than a year ago.
Oil surged 5.5 percent yesterday, the biggest one-day gain since Sept 19, 2005, when Hurricane Rita was approaching the U.S. Gulf of Mexico coast.
Crude-oil supplies increased 2.68 million barrels in the week ended Jan. 26, the report showed. A gain of 1.5 million barrels was expected, according to the median of 15 responses in a Bloomberg News survey. The department released its weekly report on petroleum inventories at 10:30 a.m. in Washington.
Changing Psychology
``The last two weeks we had the same pattern, we closed higher even though the numbers were bearish,'' Barakat said. ``The psychology of the market has changed. Any dip is seen as an opportunity to buy.''
Refineries in the week ended Jan. 26 operated at 87.1 percent of capacity, the lowest since the week ended Oct. 20, the report showed.
Total U.S. fuel consumption grew 2.5 percent to 20.9 million barrels a day last week, according to the Energy Department, which tracks shipments from refineries, pipelines and terminals to calculate demand. Demand rose for every category measured by the department with the exception of propane.
Inventories of distillate fuel, a category that includes heating oil diesel, fell for the first time in seven weeks as cold weather bolstered heating-oil use. Distillate stockpiles fell 2.65 million barrels to 140 million last week, the report showed.
Heating demand in the Northeast will be 21 percent above normal in the next week, according to Weather Derivatives, a forecaster in Belton, Missouri. The National Weather Service predicted that below-normal temperatures will persist in the eastern section of the country through Feb. 13.
Switch to Gasoline
``The heating season is effectively over,'' said Eugene X. Hodge, a managing director at John Hancock Financial Services Inc. in Boston, who manages a $4.3 billion oil and gas company bond portfolio. ``Attention is shifting to gasoline and the driving season a few months ahead.''
Gasoline inventories surged 3.82 million barrels to 224.6 million last week, the seventh-straight increase, according to the department. Stockpiles have jumped 12 percent in the last seven weeks.
Gasoline consumption over the last four weeks has averaged 9.1 million barrels a day, 3.4 percent higher than the same period a year ago, the department said. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.
Brent crude oil for March settlement jumped 93 cents, or 1.7 percent, to $57.32 a barrel on the London-based ICE Futures exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net .
Last Updated: January 31, 2007 14:37 EST |
