Gasoline Rises as Refinery Shutdown Seen Keeping Supplies Low : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Sat, 10 Mar 2001, 5:12am EST

Gasoline Rises as Refinery Shutdown Seen Keeping Supplies Low By Mark Shenk

New York, March 7 (Bloomberg) -- Gasoline rose for a fifth session, reaching a one-month high, on concern that an unexpected shutdown at a New Jersey refinery will keep supplies low before demand picks up after the winter.

Production was halted yesterday at a 150,000-barrel-a-day unit of Tosco Corp.'s Bayway refinery, traders said. The company declined to comment. Bayway is the largest refinery on the U.S. East Coast. Also sending prices higher was a brief power failure in western Venezuela, the nation's refining center and source of gasoline exports to the U.S.

The Bayway shutdown ``could lead to a depletion of stocks in the New York area,'' said Tim Evans, senior energy analyst at IFR Pegasus in New York. ``This raises the potential that the Northeast gets hit the hardest this summer, not the Midwest, as happened last year.''

Gasoline for April delivery rose 2.44 cents, or 2.7 percent, to 91.64 cents a gallon on the New York Mercantile Exchange, the highest closing price since Feb. 8. Gasoline is up 17 percent this year.

Crude oil for April delivery rose 68 cents, or 2.4 percent, to $29 a barrel on the Nymex. Prices have gained 8 percent so far this year.

Petroleos de Venezuela SA, the state oil company, said its production was affected by the two-hour power failure. Reports that outage was over came after the futures market closed. Venezuela is the second-largest source of U.S. gasoline imports after the U.S. Virgin Islands.

Low Inventories

Gasoline inventories in the U.S. unexpectedly fell 1.05 million barrels to 203.10 million barrels last week, the American Petroleum Institute said yesterday. Supplies of reformulated gasoline, which are required in the nation's most urbanized areas, fell 854,000 barrels to 40.81 million barrels.

Retail gasoline prices last summer climbed above $2 a gallon in parts of the Midwest, when refiners found it difficult to make the cleaner-burning reformulated fuel. The region will be better supplied this year, analysts said.

Supplies of crude oil dropped 1.4 percent last week to 275.8 million barrels, the lowest level since 1974, the API report showed. Dense fog has delayed tanker deliveries to refineries on the Houston Ship Channel for much of the past month.

Inventories fell to a similar low in mid-February, when the fog first began to restrict deliveries, according to the API.

``We should be getting a big inflow soon,'' said Bill O'Grady, the director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``It becomes a question of how fast you can shove oil through the ports on the Gulf.''

In London, Brent crude oil for April settlement rose 75 cents, or 2.8 percent, to $27.23 a barrel on the International Petroleum Exchange.

``There is always more than one factor at work, but one has to look at the reports of more fog slowing traffic at the Houston Ship Channel as a big one,'' said Ron Planting, the API's senior economic analyst.

OPEC Meeting

The low inventories come before a March 16 meeting of the Organization of Petroleum Exporting Countries in Vienna. Oil ministers there will decide whether to cut production for a second time this year.

OPEC oil production fell last month, though members were slow to adopt cuts in output quotas they committed to at a January meeting in an effort to prop up sagging prices, a Bloomberg survey showed.

OPEC, which pumps about 40 percent of the world's oil, aims to keep its benchmark price, made up of seven different crude oils, between $22 and $28 a barrel. Saudi Arabia, the world's top producer, has suggested that $25 should be the base price. The group's oil benchmark was $24.36 yesterday.

Indonesia, OPEC's ninth-largest producer, will propose a cut in oil production at the meeting, said Purnomo Yusgiantoro, Indonesia's minister of energy and mineral resources.

``Without a production cut, it is feared that prices could slide to as low as $20 per barrel from oversupply and lower demand,'' he said. The size of cut will depend ``on the market situation.''

-- Martin Thompson (, March 09, 2001

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