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Energy News
Wed, 21 Apr 1999, 6:10pm EDT
N.Y. Crude Rises to 16-Month High on U.S. Supply Drop, Venezuelan Cutback
(Adds comment from PDVSA spokeswoman on oil production in
8th paragraph; updates with final prices.)
New York, April 21 (Bloomberg) -- Crude oil rose more than
2 percent to a 16-month high, as a larger-than-expected drop in
U.S. inventories and reduced supplies from Venezuela signaled
that producers are succeeding in efforts to erode an oil surplus.
U.S. inventories fell for the first time in seven weeks, the
American Petroleum Institute said yesterday. Venezuela, OPEC's
third-largest producer, said a pipeline explosion will reduce
output for two weeks. The news, which followed an announcement
that Venezuela was cutting oil deliveries to customers, helped
reinforce a 57 percent rally in prices since mid-February.
''Everyone keeps expecting (the rally) to collapse, but it's
just not happening,'' said John Kilduff, senior vice president of
energy risk management at Fimat USA Inc. in New York. The cutback
in Venezuelan deliveries is a sign that promises by producers to
cut world oil supply by 2.7 percent are ''real,'' he said.
Crude oil for June delivery rose 44 cents, or 2.5 percent,
to $17.92 a barrel on the New York Mercantile Exchange, the
highest closing price since Dec. 26, 1997. Prices have rebounded
from a 12-year low of $10.35 late last year as producers
intensified efforts to wipe out an oil glut caused partly by weak
Asian demand.
In London, June Brent crude rose 19 cents to $15.89 a barrel
on the International Petroleum Exchange.
Explosion
Crude oil jumped to an intraday high of $18.05 a barrel in
New York after Venezuela's state oil company, Petroleos de
Venezuela SA, or PDVSA, said a pipeline explosion would reduce
oil output by 278,000 barrels a day for at least 15 days.
''You're talking about 4.1 million barrels -- that's quite a
bit of oil,'' said Nauman Barakat, vice president of futures
investments at Prudential Securities in New York. ''The explosion
means that if, for no other reason that default,'' Venezuela will
be able to reduce output as promised.
PDVSA is studying ways to increase production at other
fields to make up for the lost output, a spokeswoman said.
Prices were boosted earlier by inventory declines and an
announcement that PDVSA was notifying customers that oil
deliveries will be trimmed because of Venezuela's agreement to
cut output by 125,000 barrels a day, beginning this month.
Similar announcements have been made this month by other oil
exporters, including Saudi Arabia and Iran, the top producers in
the Organization of Petroleum Exporting Countries. Some traders
said they want independent verification of cutbacks, due early
next month, because of the failure of some producers to make cuts
promised last year.
''We keep hearing things from OPEC like 'We are making our
cuts,' but it's the same old stuff, said Tom Bentz, senior vice
president of energy trading at Cresvale International LLC in New
York. ''I can't wait to see what the April (production) numbers
will be like. I'm sure they won't be 100 percent'' in terms of
compliance.
Inventory Drop
U.S. crude oil inventories fell 2.06 million barrels to
340.6 million barrels last week, the American Petroleum Institute
said last night, more than analysts expected. The Department of
Energy today pegged the decline at 3.1 million barrels.
Inventories of distillate fuels, including heating oil and
diesel, fell 2.46 million barrels to 129.0 million barrels, the
API report showed, as domestic production fell and demand rose.
Analysts surveyed before the report expected an increase in
inventories ranging, on average, from 300,000 barrels to
1.0 million barrels.
While the inventory drop helped boost heating oil prices,
''we are at the end of the heating oil season so it's not that
big an issue,'' Bentz said.
Heating oil for May delivery rose 0.84 cent, or 2 percent,
to 43.53 cents a gallon on the Nymex. May gasoline was little
changed at 52.43 cents a gallon, up 0.02 cent.
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