Crude surges above $30/bbl: refinery outages contributing factor

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Crude surges above $30/bbl: refinery outages contributing factor

NEW YORK, May 15 (Reuters) - NYMEX crude oil futures soared above $30 a barrel in a bout of fresh buying in afternoon trade on Monday as gasoline futures raced to new contract highs.

NYMEX June crude traded as high as $30.04 at 1:08 p.m (1708 GMT), the highest in more than two months and extending the day's gains to 42 cents.

June gasoline trade roared to another contract high of 97.50 cents a gallon, stretching its gains to 3.46 cents on the day.

Traders said concerns over refinery outages, underlined by a glitch at Equilon Enterprises' (quote from Yahoo! UK & Ireland: SHEL.L) (NYSE:TX - news) benzene unit at its Wood River, Ill., refinery were fuelling gasoline's rise.

``The Wood River benzene unit's outage is having an impact on gasoline because its output is used as a blending component for gasoline,'' said Thomas Blakeslee, an analyst at Energy Merchants in Bel-Air, Maryland.

But Blakeslee and other traders said that NYMEX crude at above $30 may be unsustainable, with an OPEC meeting just five weeks away.

``Technicians are advising caution that the market is already a bit on the high side,'' Blakeslee noted.

Earlier, Mexican Energy Minister Luis Tellez said on Monday that oil producing nations are in agreement to raise crude oil output in September if necessary.

Tellez reiterated that OPEC and independent producers, like Mexico, are not likely to decide on an output increase at a June 21 summit in Vienna because more oil ``is not necessary'' for the moment.

On Friday, U.S. Energy Secretary Bill Richardson raised concern over crude oil hitting $30 on the NYMEX and urged producers to consider increasing output at the June meeting.

OPEC President Ali Rodriguez said Sunday it was to early to discuss production and on Monday he said he did not at the moment see an inclination among oil producers to increase supply.

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-- Carl Jenkins (Somewherepress@aol.com), May 15, 2000

Answers

Crude Oil Rises as OPEC Rebuffs Calls for More Oil Supply

New York, May 15 (Bloomberg) -- Crude oil rose above $30 a barrel for the first time in eight weeks as producers rebuffed calls from consumers for a rise in oil production when OPEC meets in June.

U.S. Energy Secretary Bill Richardson on Friday urged OPEC to ``keep an open mind'' about raising output after a 15 percent rally this month. While OPEC's president said yesterday that output would rise if prices rally, most members have lined up against another increase so soon after raising it in April.

``I don't think it's fully decided, but the most likely scenario is that there'll be no increase'' in June, said Tim Evans, senior energy analyst at IFR Pegasus in New York.

Crude oil for June delivery rose 30 cents, or 1 percent, to $29.92 barrel on the New York Mercantile Exchange, the highest closing price since March 17. Oil is up 67 percent from a year ago. Prices rose as high as $30.04 before falling back. Oil rose briefly to $30.00 a barrel on Friday.

Evans expects prices stay in a range between $24 and $31 a barrel in coming weeks.

In London, Brent crude oil for June settlement, which expires tomorrow, rose 28 cents to $28.33 a barrel on the International Petroleum Exchange.

The Organization of Petroleum Exporting Countries agreed informally at its March meeting to keep the price for a collection of crude oils it monitors within a range of $22-$28 a barrel by raising or lowering output. New York prices tend to be about $2 a barrel higher.

``If prices aren't in the band-range, production changes,'' OPEC President Ali Rodriguez, who is also Venezuela's oil minister, said yesterday hours after meeting with Richardson in San Diego.

Raising Output

Oil prices fell below $24 a barrel in New York last month, down from a nine-year high of $34.37 in March, after OPEC agreed to raise output starting April 1. Prices have since recovered on expectations that supplies, particularly of gasoline, will be tight this year.

Gasoline for June delivery rose 2.75 cents, or 2.9 percent, to 96.79 cents a gallon on the Nymex, the highest closing price since March 14. Heating oil for June delivery rose 0.42 cent, or 0.6 percent, to 77.25 cents a gallon.

World oil demand will outstrip supply during the third and fourth quarters, reducing inventories, according to the Paris- based International Energy Agency, an adviser to the world's biggest industrialized nations. The report assumes OPEC will leave output unchanged when it meets June 21.

Rilwanu Lukman, OPEC secretary-general and the OPEC representative for Nigeria, said today that OPEC is ``prepared to act if necessary,'' though ``I doubt it will be necessary in the next month.''

Unchanged Output

The prevailing view among OPEC members is for the group to keep output unchanged at the June meeting and have another look at it during a September meeting.

Iran, OPEC's No. 2 producer, said oil's rally this month was due to false information disseminated by consuming nations and exporters shouldn't respond by boosting output, according to the country's state-owned radio.

Mexico, a non-OPEC producer that collaborates with OPEC on production policy, said today that an increase in output in September, not June, was more likely.

``All the countries are firmly agreed that we will need an increase in production because autumn begins and then winter comes, which is the season of most demand,'' Mexican energy secretary Luis Tellez said on a local radio station.

Gulf Talks

Meantime, Richardson sent Deputy Energy Secretary David Goldwyn to the Persian Gulf to discuss strategy with some of the region's producers, including Saudi Arabia and the United Arab Emirates.

UAE Oil Minister Obeid bin Seif al-Nasseri said in Abu Dhabi, after meeting with Goldwyn, that ``any increase in OPEC oil production is not possible except in the event of big changes in the oil market,'' the state-run news service WAM reported.

While prices are back close to $30 a barrel in New York, analysts said there's less urgency for extra oil supplies than was in March.

``You have to be careful on the diplomatic front using up too much of your goodwill when it's not really clear that it's needed,'' said Evans.

And over time, consumers may get used to higher prices anyway.

``Richardson came out this time at around $30, whereas in mid- November he came out at $27. What does that signal?'' said Leo Haviland, president of Financial Analysis Systems, a New York energy consulting firm. ``So long as the world economy is strong, inflation does not become a major problem and the stock market doesn't collapse, perhaps the U.S. will grudgingly tolerate higher prices than the $27 level.''

May/15/2000 17:06 GMT

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-- Martin Thompson (mthom1927@aol.com), May 15, 2000.


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