Oil Rises to Record on Signs Stronger Economy May Boost Demand
By Margot Habiby
April 18 (Bloomberg) -- Crude oil and gasoline climbed to records in New York as better-than-expected earnings results signaled a strengthening economy that may boost demand.
U.S. stocks rallied, capping the best week since February for the Standard & Poor's 500 Index, following earnings reports from companies such as Google Inc. and Caterpillar Inc. that exceeded analyst estimates. Refineries operated at 81.4 percent of capacity last week, the Energy Department reported.
``The real gloomy scenario has been sort of ameliorated with some of these very positive earnings and the indication that the worst is behind us,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``There will be an uptick in energy demand with the renewed economic outlook for the second half of the year in particular.''
Crude oil for May delivery rose $1.83, or 1.6 percent, to settle at $116.69 a barrel at 2:46 p.m. on the New York Mercantile Exchange, a record close. Oil touched an all-time high of $116.97 a barrel at 5:01 p.m. in electronic trading. The Nymex posted a high trade of $117 a barrel at 2:47 p.m., and the quote was subsequently withdrawn.
Prices rose 6 percent this week, the biggest weekly gain since February 2007. They are up 85 percent from a year ago.
Gasoline for May delivery rose 3.15 cents, or 1.1 percent to $2.9893 a gallon. Earlier, it touched $2.9934 a gallon.
U.S. Energy Secretary Samuel Bodman said today that the government will continue to buy oil for the Strategic Petroleum Reserve, even with prices over $100 a barrel. Bodman, who spoke to reporters after a speech in Virginia, said the U.S. needs a 90-day supply of oil in reserve and currently has 55 to 56.
Pickens Long on Oil
Boone Pickens, a billionaire energy investor, said yesterday he reversed course and adopted a long position on oil, meaning he is betting the price of crude will rise.
World oil supplies won't exceed 85 million barrels a day because of high depletion rates of existing wells, Pickens, the founder and chairman of Dallas-based BP Capital LLC, said yesterday in a speech at Georgetown University.
U.S. fuel consumption fell 1.4 percent in the first quarter, compared with a year earlier, the American Petroleum Institute said on April 16.
Deliveries of petroleum products, a measure of demand, declined to an average 20.48 million barrels a day in the quarter, from 20.77 million barrels last year, according to a monthly report from the industry-funded group. Demand in March averaged 20.37 million barrels a day, down 0.8 percent from a year earlier.
Supplies Lower
Gasoline supplies have fallen for the past five weeks to the lowest since January as refiners cut their processing rates.
``The 81 percent refinery run rate could have us quickly ripping through our gasoline storage, particularly as the driving season picks up, which it will despite the high pump price,'' Kilduff said.
The peak gasoline consumption period in the U.S., known as the summer driving season, extends from Memorial Day at the end of May through Labor Day at the beginning of September.
Crude's rally came as the dollar rose the most against the euro in more than two weeks. Commodity prices have surged over the past year in response to the plunging dollar. Today's move in the energy complex ran counter to other commodities such as gold, which fell the most in two weeks as the dollar strengthened. Silver fell as much as 5.1 percent.
`Commodity Bubble'
``You have a generalized commodity bubble due to commodities having become an asset class that institutions use to an increasing extent,'' George Soros said yesterday at an event sponsored by the Centre for European Policy Studies in Brussels.
Brent crude oil for June settlement rose $1.49, or 1.3 percent, to $113.92 a barrel on London's ICE Futures Europe exchange. The futures touched a record $114.22.
The main militant group in Nigeria's oil-rich Niger Delta said that it sabotaged a pipeline operated by a unit of Royal Dutch Shell Plc yesterday.
A 5.2-magnitude earthquake in Illinois, the state's second- most-powerful on record, raised concern earlier today that it may have affected regional refinery operations.
Marathon Oil Corp., the largest refiner in the U.S. Midwest, shut its Potoka crude oil pipeline as a precaution after the quake struck, though it has since returned the line to service, said Linda Casey, a spokeswoman, in a telephone interview.
Marathon's 213,000 barrel-a-day refinery in Robinson, Illinois, wasn't affected, she said. Neither were regional facilities run by Valero Energy Corp., BP Plc and CountryMark Cooperative, the companies said.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Last Updated: April 18, 2008 17:44 EDT |
