Related News

Home » Business » Energy

Oil prices settle lower after supply report

OIL prices fell yesterday as a key government report showed U.S. petroleum supplies increased last week. Energy traders meanwhile continued to watch developments in Libya, where weeks of unrest showed no signs of easing.

Benchmark West Texas Intermediate crude for April delivery lost 64 cents to settle at US$104.38 a barrel on the New York Mercantile Exchange.

In London, Brent crude rose US$2.88 to settle at US$115.94 per barrel on the ICE Futures exchange.

The report from the Energy Department's Energy Information Administration showed crude oil supplies grew by 2.5 million barrels. That's about what analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected.

Gasoline supplies fell by 5.5 million barrels, almost twice the amount analysts forecast. Distillates, which include diesel and heating oil, shrank by four million barrels, also twice as much as analysts estimated. The nation's refineries operated at 82 percent of capacity, slightly above expectations.

PFGBest analyst Phil Flynn attributed the steep decline in gasoline supplies to refiners who were getting rid of winter blends as they switch to summer formulas intended to reduce smog.

With oil supplies abundant close to home, much of the focus remains on North Africa and the Middle East, and what may lie ahead for global supplies. Anti-government unrest has shut down most of Libya's 1.6 million barrels per day of crude production. Forces loyal to Moammar Gadhafi struck an oil pipeline and storage facility yesterday as they attacked rebels in at least two major cities.

Flynn said oil prices showed little reaction to the news because much of the risk to Libyan supplies has been priced in.

Traders are concerned that uprisings could spread to Saudi Arabia, the world's largest crude exporter and the most important member of the Organization of Petroleum Exporting Countries. Saudi Arabia has increased production to make up for a drop in Libyan exports, but that is cutting into its surplus supply. Platts reports that OPEC's crude production rose last month by 230,000 barrels per day from January levels, to 29.8 million barrels per day.

"Should another country on the scale of Libya also exit the market, Saudi Arabia's spare capacities would be likely to fall to a critical level of less than two million barrels a day," analysts at Commerzbank in Frankfurt said.

Saudi Arabia controls most of the world's spare oil production capacity - about 4.5 million barrels a day. That spare capacity is viewed as a buffer against soaring oil prices as demand picks up in the global economic recovery.

"We should not panic," said Sara Akbar, the CEO of Kuwait Energy Co. "There is more than enough spare capacity to cover what has happened in Libya," she said.

Akbar and other prominent figures in global oil are meeting in Houston this week to discuss the state of the industry.

"There is no shortage of oil in the market," Algerian Minister of Energy and Mines Youcef Yousfi told reporters. He said high prices are a result of the "hardly predictable logic" of oil traders. "It's psychological," he said. "When people see that the supply is at a normal level, the price will go down."

Uncertainty about the Middle East prompted Bank of America Merrill Lynch to raise its 2011 WTI oil price forecast to US$101 per barrel from US$87, with Brent crude expected to average US$122 a barrel in the second quarter.

"Our base case assumes Libya will stay mostly offline for 6 months, limited oil infrastructure damage, no further oil supply disruptions in the region and modest global demand destruction," the analysts said in a report.

In other Nymex trading for April contracts, heating oil rose 5.96 cents to settle at US$3.0707 a gallon, gasoline gained 8.05 cents to settle at US$3.0272 a gallon and natural gas picked up 6.6 cents to settle at US$3.930 per 1,000 cubic feet.




 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend