| Oil prices settled below $54 |
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| Monday,June 06,2005 Posted: 14:07 BJT(0607 GMT) |
BEIJING, June 3 -- The price of oil gyrated on Thursday after the U.S. government released data that showed a growing domestic supply of gasoline and other fuels, but also rising demand.
July light sweet crude futures fell 97 cents to settle at $53.63 a barrel on the New York Mercantile Exchange, almost $2 below the intraday high of $55.40.
Oil analyst Marshall Steeves at brokerage Refco Group Inc. in New York said "schizophrenic is a very good word" to describe the energy market's psychology these days.
Just a few weeks ago prices had fallen below $47 a barrel on signs of slower economic growth and rising petroleum inventories worldwide. Now traders seem consumed once again by fears of potential supply tightness later in the year.
On Wednesday oil prices surged more than $2.50 a barrel, or 5 percent, because of nagging nervousness that increasing oil consumption will make it difficult for producers to keep up, leaving the world vulnerable to any unexpected disruptions.
Over the past four weeks demand for distillate fuel, which includes diesel, jet fuel and heating oil, has been 5 percent above year ago levels, while gasoline demand has been 1.8 percent higher, according to the Energy Department's weekly petroleum snapshot.
The agency said inventories of crude oil rose last week by 1.4 million barrels to 333.8 million barrels, or 11 percent above last year, while gasoline inventories grew by 1.3 million barrels to 216.7 million barrels, up 6 percent from a year ago.
The supply of distillate fuel, which includes heating oil, jet fuel and diesel, rose more modestly, up 700,000 barrels to 106.4 million barrels, or roughly equal to year ago levels.
"Distillate inventories should be building like crazy right now, but they're not," said John Kingston, director of oil at Platts, a division of McGraw-Hill Cos. Kingston said that refiners focused on cranking out gasoline today may find themselves rushing to boost distillate output by fall to prepare for the next home-heating season.
"We're setting ourselves up for problems in winter," he said.
Heating oil futures were up less than a penny to $1.5422 per gallon, retreating from earlier highs of $1.595 per gallon. On Wednesday heating oil futures bolted 9 cents higher on concerns about strong demand later in the year.
"With the U.S. driving season officially under way, gasoline was supposed to spark, but the fireworks are in heating oil instead," said Energyintel analyst Matt Piotrowski.
This, he said reflected a "tight global market for road diesel and other middle distillates, such as jet fuel, kerosene and heating oil."
While the distillate fuel data was definitely a subject of much concern on Thursday, not all experts saw what the fuss was about.
"There is still plenty of time for distillate stocks to rebuild," Steeves said. "Even though global demand is quite strong, I don't think it's worrisome."
Oil broker Aaron Kildow of Prudential Financial in New York also does not consider the latest government data to be supportive of higher prices. "It's pretty hard to justify," he said. Still, Kildow said there are plenty of investors speculating on the price of oil these days and that the logic of supply and demand does not always prevail in such a volatile market.
Gasoline futures declined 2.88 cents to $1.5154 per gallon on Nymex. In London, Brent crude settled 80 cents lower at $52.50 a barrel on the International Petroleum Exchange.
Oil prices are now around 34 percent higher than a year ago but would still need to surpass $90 a barrel to match the inflation-adjusted high set in 1980.
On Wednesday the president of the Organization of Petroleum Exporting Countries, Sheik Ahmed Fahd Al Ahmed Al Sabah, said the cartel, which produces 40 percent of global crude, would maintain its current production ceiling until the third quarter of 2005.
OPEC is to meet June 15 in Vienna to discuss production levels. Al Sabah's comments are likely to rile price hawks like Venezuela who have indicated a preference for an output cut. But analysts said the recent uptrend in oil prices makes an output cut quite unlikely.
The 11-member group is pumping out around 30 million barrels daily. Global demand is expected to average more than 84 million barrels a day throughout 2005.
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