Refinery problems contributed to gas supply decrease

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Refinery problems contributed to gas supply decrease Thursday, 20 April 2000 21:33 (ET)

Refinery problems contributed to gas supply decrease By HIL ANDERSON, UPI Chief Energy Correspondent

LOS ANGELES, April 20 (UPI) - Oil markets were relatively quiet Thursday following a run-up of prices caused by some unexpected reductions in gasoline and heating oil supplies.

May heating oil prices that had climbed 6.07 cents on Wednesday fell 1.13cents Thursday to 75.72 cents per gallon on the New YorkMercantile Exchange. May gasoline and June crude were higher, but only by slight amounts.

The lull in activity on NYMEX may have been due to the coming holiday weekend. Traders often take the day off, or leave the office early without making any major moves that might leave them out on a limb for the long weekend.

The U.S. Energy Information Administration reported Thursday that U.S.gasoline supplies declined last week to 202 million barrels because, in part, of a decrease in production of 100,0000 barrels a day and a similar reduction in imports during the week. The EIA said breakdowns with production units at three Texas refineries contributed to the decline.

The EIA said the trouble involved the catalytic cracker unit at the Motiva refinery in Port Arthur, the reformer unit at Crown Central's Pasadena plant, and the heavy oil cracker at the Valero plant in Corpus Christie. It was not immediately known if any of the units were back on line.

A lot of the gasoline produced in the Gulf Coast is shipped to points on the East Coast through the Colonial Pipeline. The Colonial moves about 80 million gallons of gasoline, heating oil (diesel fuel) and jet fuel per day from Houston to New York. The New York terminus of the pipeline is used as the specified delivery point for the gasoline contracts traded on NYMEX.

A number of major oil companies make up the ownership of Colonial, but one of them has agreed to give up its stake.

ExxonMobil said Thursday it will sell back its 11.49 percent interest in Colonial to satisfy a condition set down by government regulators for the approval of the 1999 merger agreement between Exxon and Mobil. Terms of the stock resale agreement were not revealed.

The Gulf Coast is already a major source of crude oil as well as refining,and a new report says it will likely become even more important in the next two years.

The Independent Petroleum Association of America issued a forecast Thursday predicting that U.S. crude production will increase by "a meager 0.1 percent" this year to 5.93 million barrels per day despite higher world crude prices. Much of the increase is expected to come from the deep waters of the Gulf of Mexico and will offset an expected decline in production in Alaska.

Although the IPAA expects an increase in petroleum demand in 2001 to be more than 19 million barrels per day, up 1.3 percent over 2000, increases in production will lag due, in part to a reduction in a number of drilling rigs involved in exploration.

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-- Martin Thompson (mthom1927@aol.com), April 21, 2000


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