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Energy News
Thu, 29 Apr 1999, 9:17pm EDT
N.Y. Gasoline Rises to 16-Month High as Refiners Seen Cutting Production
Gasoline Rises to 16-month High as Refiners Cut Production
New York, April 29 (Bloomberg) -- Gasoline rose for a third
day, reaching a 16-month high, on anticipation that supplies will
be leaner in coming weeks as thin profit margins force refiners
to trim output.
Refinery margins have plunged 28 percent this month, based
on futures market prices, as crude oil rose faster than gasoline
and heating oil. European refineries run by the Royal Dutch/Shell
Group reduced crude processing by 10 percent, Platt's Global
Alert reported, and traders now expect U.S. refiners to slow
production for a second week.
''Refiners are cutting back and that certainly gave the
market a leg up today,'' said Nauman Barakat, vice president of
futures investments at Prudential Securities in New York.
Gasoline for May delivery rose 1.33 cent, or 2.5 percent, to
55.22 a gallon on the New York Mercantile Exchange, the highest
price since Dec. 26, 1998. Heating oil for May delivery increased
0.68 cent, or 1.5 percent, to 44.79 cents a gallon.
Crude oil for June delivery rose 8 cents to $18.53 a barrel
on the Nymex, reaching a 16-month high for a second day.
Shell Cutbacks
Shell will probably reduce its production by at least
100,000 barrels a day for a couple of weeks, Platt's said.
The American Petroleum Institute said Tuesday that U.S.
refining rates fell 1.4 percentage points last week, the first
decline in five weeks.
Imports of gasoline soared 58 percent last week, part of a
1.03 million barrel surge in petroleum product shipments to the
U.S. Demand for gasoline increased 6 percent, according to API
figures.
Crude oil was little changed as traders anticipated
that oil exporters will cut production as promised, reducing a
worldwide surplus.
Prices have rallied 50 percent since the beginning of March,
when producers began discussing a round of output cuts. OPEC
members now may do a better job of complying with pledges to trim
output than they did with earlier cuts, as the rally may make
revenue higher now than it was at the start of the year, when
more barrels were sold.
''OPEC will make the cuts,'' said Al Zappulla, a trader at
ABN Amro Inc. in New York. ''They know that if they do, they can
make up for the difference in volume with higher prices.''
In London, June Brent crude oil was up 5 cents at $16.45 a
barrel on the International Petroleum Exchange.
Even though OPEC members are selling fewer barrels, revenue
may have grown substantially because of higher prices.
Saudi Revenue
Saudi Arabia's revenue from oil sales may have climbed by
more than 50 percent from early March, even if it trimmed
production by the promised 585,000 barrels a day. Its Arab Light
grade of crude, for example, sold for $8.13 a barrel on March 1
and goes for $14.32 a barrel today.
The 10 members of the Organization of Petroleum Exporting
Countries involved in the output-cutting agreement are trying to
maintain higher prices, after crude fell to a 12-year low in
December. Production by the 11th member, Iraq, is controlled by
the United Nations.
OPEC and a group of independent producers that includes
Mexico and Norway have pledged to reduce world output by more
than 5 million barrels a day in a series of agreements stretching
back to last April. The latest agreement, made in March, took
effect this month.
OPEC's record in adhering to output reductions promised last
year was spotty. OPEC members met 78 percent of the cuts they
promised for March, according to Bloomberg estimates.
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