Oil Up Sharply As Gasoline Supply Falls
NEW YORK (AP) _ Oil prices rallied Wednesday to their highest level in nearly two months, with crude futures closing above $21 per barrel as traders feared the nation’s supply of gasoline was sinking ominously low.
The American Petroleum Institute reported the night before that the gasoline stockpile fell last week to 206.5 million barrels, not far above the level of 205 million barrels considered a bare minimum by the government.
″That is officially called the minimum operating level,″ said Rita Beale, a petroleum products analyst with Shearson Lehman Brothers Inc. ″It is definitely fundamentally and psychologically supportive of gasoline prices.″
Light sweet crude oil for delivery in May settled at $21.05 per barrel, up 79 cents, at the New York Mercantile Exchange. Oil last settled above $21 per barrel on Feb. 14, when it closed at $22.32 during the more volatile trading sessions of the Gulf War.
Unleaded gasoline for delivery in May settled at 70.67 cents a gallon, up 2.19 cents. Home heating oil for delivery in May settled at 56.02 cents a gallon, up 1.47 cents.
Getting near 205 million barrels does not necessarily mean shortages will develop, because the nation has plenty of crude oil on hand and the refinery capacity to make more gasoline. But as supplies dwindle, it can force companies to make more purchases, often at higher prices, as they obtain enough gasoline to keep their pipelines flowing and their customers supplied.
″There’s no reason to panic,″ Beale said. ″There is plenty of crude.″
Part of the sudden drop may have come as the industry uses up the gasoline that was made for use in the winter. Under laws intended to protect the environment, gasoline is blended differently for the different seasons to minimize the amount of evaporation.
Still, the market has been concerned for some time that the gasoline supply was shrinking to its lowest level in years. Some oil companies used up extra supplies during the Persian Gulf crisis so they could avoid buying expensive fuel at the time, and some gasoline supplies that would have gone to Europe and Asia were diverted to the allied war machine.
Fortunately for motorists, some of the big gains in gasoline futures have not set in fully at the pump because of regional price wars being waged by the oil companies, Beale said.
Traders took the latest gasoline supply figures as an indication that refiners will have to buy more crude oil to meet increased demand as the summer driving season approaches. The rally raised all of the petroleum futures to technical levels that spurred more buying, said Peter Beutel, an oil analyst with Pegasus Econometric Group Inc., in Hoboken, N.J.
In London, North Sea Brent Blend crude oil for May delivery settled at $19.41 per barrel, up 60 cents, at the International Petroleum Exchange.