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To: ItsAllCyclical who wrote (64897)	4/18/2000 3:50:00 PM
From: Jon Cave	Respond to of 95453

Tight US Supply Pushing Up Heating Oil, Gasoline Prices Dow Jones News By Masood Farivar NEW YORK (Dow Jones)--After tracking crude oil prices lower for much of the last three weeks, U.S. heating oil and gasoline prices are showing signs of rising again. The newfound vigor in heating oil - and to a lesser degree in gasoline - has been sparked by concerns over tight supplies, and follows steep price declines that followed the Organization of Petroleum Exporting Countries' agreement in late March to increase production by 1.7 million barrels a day. So far this week, May heating oil futures on the New York Mercantile Exchange have gained 4.38 cents to 71.00 cents cents a gallon. May gasoline rose a total of 3.08 cents Monday and Tuesday on the Nymex to 82.90 cents a gallon. Both heating oil and gasoline prices followed crude down after the OPEC decision, though their declines from year-high levels began earlier in the year. Heating oil, which hit a post-Gulf War high of 97.74 cents a gallon in late January following a cold snap in the Northeast U.S., the world's largest heating oil market, began its fall when panic in the wholesale market eased. Then, a warmer-than-expected March helped accelerate the product's descent, with the front-month heating oil futures contract falling to a low of 62.75 cents in early April. Speculators who had long positions in the contract exited the market at that time, leaving it oversold and ripe for a buyback. On the other hand, the rise in gasoline prices began in early February amid concerns over historically low U.S. gasoline inventories and uncertainty over whether OPEC members would boost their production. As market anxiety over low stocks increased, the price of gasoline for March delivery peaked at $1.025 in early March, with U.S. officials warning that retail prices of the product could rise to as high as $1.80 a gallon later this year. But the OPEC agreement to pump more oil calmed nerves, and helped send gasoline futures to as low as 74.30 cents a gallon earlier this month. Refinery Operating Rates Still Below Year-Ago Levels Some analysts worry that even as OPEC sends more oil into the market and despite a marked improvement in the marginal profit in processing crude into products, refiners aren't running their plants at full capacity. That is largely because many have production units down for seasonal maintenance designed to ensure maximum gasoline output in time for the higher-consumption summer months. As a result, refiners have been operating at about 91% of operable capacity, compared with 96.8% a year earlier, according to the latest figures from the American Petroleum Institute. Gasoline inventories stand at about 204 million barrels - 14 million barrels below last year's levels - while distillate stocks, which include heating oil, were 34 million barrels below last year's 131.491 million barrels. With distillate stocks at their lowest level of the year, a cold snap and subsequent strength in the spot market lured buyers back into the market. What is more, analysts say, even though heating oil demand may ease with the end of winter weather, demand for diesel fuel will grow as farming activity around the country picks up. "People tend to forget about agricultural demand for diesel, which helps to prolong the seasonal tightness in that market," said Tim Evans, an analyst at IFR Pegasus in New York. "Although we don't have much time to go in the heating season, the market is tighter now than it was at end of January, when we were nearly 30 cents higher." But despite an expected growth in demand for diesel fuel, May heating oil futures are seen as technically overbought, and are expected to weaken. The contract expires on the last business day of the month. Gasoline prices, on the other hand, are expected to rise as the summer driving season starts. While last week's American Petroleum Institute report showed a small build in U.S. gasoline stocks, a week or two of consecutive draws in inventories could boost prices further, analysts said. Analysts will be paying even closer attention over the next few weeks to gasoline demand, which has remained relatively flat this year, compared with last year. The high price of gasoline earlier this year put a damper on consumption, some analysts say. But with prices slipping off their highs, drivers may be inclined to spend more time on the road, paving the way to higher prices.