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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (47257)	7/2/1999 9:45:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

Crude gushes higher; will gasoline follow? Calgary Sun, July 2 CHICAGO (AP) -- A gallon of gasoline remains cheaper during the busy summer driving period than a cup of gourmet coffee or some brands of bottled water, but sharply higher crude oil prices are threatening to change that. The U.S. Energy Department on Thursday said gasoline prices nationwide remain only slightly higher than a year ago going into the busy Fourth of July holiday, when millions of Americans are expected to take to the roads. But crude oil prices now are their highest in 19 months could force them to dig deeper into their pockets in coming days, industry observers believe. "Some areas could see an effect on their gas prices fairly quickly," said AAA spokesman Mitch Fuqua. "But even in the short-term, there's no easy way to predict which way prices are going to turn. It's a wait-and-see game." Retail gasoline prices fluctuate based on demand, competitive issues, taxes in a geographical region, refinery production and capacity, and both present and anticipated future crude oil prices. For example, prices at the pump fell nationwide by an average 5 cents between early May and early June -- despite tightening inventories -- as driving demand remained weaker than expected at the start of the peak summer period. In the most recent survey of 10,000 gasoline stations nationwide, the national weighted average for gasoline, including all grades and taxes, was $1.1960 on June 25, up only 0.58 cent per gallon from June 13, according to the Lundberg Survey. But oil producers this week are enjoying the best prices they've seen for crude since November 1997 amid intense summer driving demand and sharp declines in available supply. Futures prices for August crude rose 10 cents Thursday on the New York Mercantile Exchange to $19.39 a barrel. The roots of the rising prices come from an agreement in March between OPEC and other key producers, including Mexico and Norway, to cut their combined daily production by 2.7 percent, or 2.1 million barrels, beginning in April. Some were skeptical the disparate parties could maintain such cuts since quota-busting has been widespread over the years. But compliance has reached more than 90 percent, which provides a comfortable cushion from the actual production cutbacks needed to sustain prices, said energy analyst John Saucer at Salomon Smith Barney. "The fact is, they've given themselves a lot of breathing room and seem to be working with levels of cooperation that we haven't seen in a long time," Saucer said. "That means the bias is going to be higher for crude, at least through the end of the year, and to a lesser extent, for (gasoline and heating oil)." But a similar sharp increase earlier this year was nearly erased after refiners stressed by weak profit margins for manufacturing gasoline and heating oil also reduced their production of such products, slashing the need for crude. Analysts said that factor is unlikely to come into play in the future because gasoline and heating oil inventories are shrinking rapidly, particularly on the West Coast, where driving demand is strongest. The current round of cuts comes on top of 3.1 million in reductions pledged over the past year -- moves that had little effect on prices at the pump amid weak demand in Asia and Europe, the widespread cheating on exports and increased output from Iraq. But analysts noted demand also is on the rise in recovering Asian economies, a factor that has helped erase a year-to-year world oil surplus and could lead to virtually no supplies in storage by year's end. If that occurs, inventories of gasoline and heating oil also could fall sharply. That could result in steep price increases if driving demand remains relatively strong or if parts of the world suffer a frigid winter, Saucer said. canoe.ca