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Oil settles above US$101 as refineries crank up
Source: Agencies |
May 26, 2011, Thursday
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OIL climbed above US$101 per barrel yesterday as investors cheered a sharp rise in refining activity in the U.S.
Benchmark crude for July delivery added US$1.73 to settle at US$101.32 per barrel on the New York Mercantile Exchange. In London, Brent crude rose US$2.40 to settle at US$114.93 per barrel on the ICE Futures exchange.
Oil rose after the government reported that refinery utilization grew to 86.3 percent last week, up from 83.2 percent the week before. The increased activity came mainly in the U.S. Midwest, where benchmark crude is delivered.
"A lot of people are looking at that and thinking it'll absorb some excess crude supply down the road," said Michael Lynch, president of Strategic Energy & Economic Research.
Analysts also said that energy markets are still responding to bullish outlooks earlier this week from investment banks that see oil prices will rise in coming months. Goldman Sachs expects benchmark West Texas Intermediate crude to hit US$135 per barrel by the end of 2012. Morgan Stanley said Brent will average US$120 per barrel this year, while J.P. Morgan thinks Brent will be US$130 per barrel in the third quarter.
"They're very cautious about selling after the big boys come out and start pumping up" the price," oil analyst Jim Ritterbusch said.
In addition Barclays Capital said crude demand could pick up this summer as power shortages in China worsen. An extended drought is reducing hydroelectric sources and forcing authorities to turn to coal and diesel to run generators.
A weaker dollar pushed oil higher earlier in the day. Since oil is priced in dollars, a weaker greenback makes crude more affordable for investors holding foreign currency.
The Energy Department reported that oil and gasoline supplies in the U.S. grew last week, as demand for petroleum products fell. The Energy Information Administration said crude supplies increased unexpectedly by 600,000 barrels and gasoline supplies rose by 3.8 million barrels. The four-week average oil demand in the U.S. dropped 5.3 percent, while gasoline demand fell 2.1 percent. Demand for diesel fuel and jet fuel also declined.
"The trend has become clearer as pump prices increased" that consumers have been changing their driving habits, said Andrew Lipow, president of Lipow Oil Associates in Houston.
Retail gasoline prices dropped by more than a penny a gallon yesterday to a national average of US$3.814 per gallon. That's down more than 10 cents in a week. Oil analyst Tom Kloza said pump prices should slide another 30 cents per gallon by June, though problems at Exxon Mobil's refinery in Joliet, Illinois, could keep prices up in the Midwest.
An Exxon spokesman said that a malfunctioning compressor at Joliet was being repaired. The company wouldn't say how long repairs will take or if the refinery had slowed fuels production.
In other Nymex trading for June contracts, heating oil rose 7.1 cents to settle at US$2.9923 and gasoline futures picked up 2.87 cents to settle at US$2.9867 per gallon. Natural gas gained 3.2 cents to settle at US$4.423 per 1,000 cubic feet.
Benchmark crude for July delivery added US$1.73 to settle at US$101.32 per barrel on the New York Mercantile Exchange. In London, Brent crude rose US$2.40 to settle at US$114.93 per barrel on the ICE Futures exchange.
Oil rose after the government reported that refinery utilization grew to 86.3 percent last week, up from 83.2 percent the week before. The increased activity came mainly in the U.S. Midwest, where benchmark crude is delivered.
"A lot of people are looking at that and thinking it'll absorb some excess crude supply down the road," said Michael Lynch, president of Strategic Energy & Economic Research.
Analysts also said that energy markets are still responding to bullish outlooks earlier this week from investment banks that see oil prices will rise in coming months. Goldman Sachs expects benchmark West Texas Intermediate crude to hit US$135 per barrel by the end of 2012. Morgan Stanley said Brent will average US$120 per barrel this year, while J.P. Morgan thinks Brent will be US$130 per barrel in the third quarter.
"They're very cautious about selling after the big boys come out and start pumping up" the price," oil analyst Jim Ritterbusch said.
In addition Barclays Capital said crude demand could pick up this summer as power shortages in China worsen. An extended drought is reducing hydroelectric sources and forcing authorities to turn to coal and diesel to run generators.
A weaker dollar pushed oil higher earlier in the day. Since oil is priced in dollars, a weaker greenback makes crude more affordable for investors holding foreign currency.
The Energy Department reported that oil and gasoline supplies in the U.S. grew last week, as demand for petroleum products fell. The Energy Information Administration said crude supplies increased unexpectedly by 600,000 barrels and gasoline supplies rose by 3.8 million barrels. The four-week average oil demand in the U.S. dropped 5.3 percent, while gasoline demand fell 2.1 percent. Demand for diesel fuel and jet fuel also declined.
"The trend has become clearer as pump prices increased" that consumers have been changing their driving habits, said Andrew Lipow, president of Lipow Oil Associates in Houston.
Retail gasoline prices dropped by more than a penny a gallon yesterday to a national average of US$3.814 per gallon. That's down more than 10 cents in a week. Oil analyst Tom Kloza said pump prices should slide another 30 cents per gallon by June, though problems at Exxon Mobil's refinery in Joliet, Illinois, could keep prices up in the Midwest.
An Exxon spokesman said that a malfunctioning compressor at Joliet was being repaired. The company wouldn't say how long repairs will take or if the refinery had slowed fuels production.
In other Nymex trading for June contracts, heating oil rose 7.1 cents to settle at US$2.9923 and gasoline futures picked up 2.87 cents to settle at US$2.9867 per gallon. Natural gas gained 3.2 cents to settle at US$4.423 per 1,000 cubic feet.
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