abcnews.go.com Feb. 21

— NEW YORK (Reuters) - U.S. crude oil futures soared more than $1 a barrel early on Friday after a fuel barge caught fire and exploded near an oil storage terminal off New York's Staten Island.

The blast in the Arthur Kill waterway between Staten Island and New Jersey sent plumes of black smoke and flames into the sky and prices on the New York Mercantile Exchange soaring.

NYMEX April crude oil jumped to an intraday high of $35.95 a barrel, surging $1.21 a barrel. By 12:29 p.m. EST, prices had slipped back to $35.44 a barrel, up 70 cents on the day.

Erroneous reports that the blast had hit an oil refinery also strengthened the initial gains. Prices fell back as it emerged that only an oil storage facility was affected.

Law enforcement officials said there were no initial indications the blast had been caused deliberately, but the initial surge came on fears that the explosion may have been not have been an accident, traders said.

The U.S. government has already put the country on the second-highest level of terror threat alert.

Oil prices have already been trading at their highest level for 29 months amid growing fears of war in Iraq, the world's eighth biggest oil exporter. An 11-week strike in Venezuela has further cut down U.S. winter fuel supplies.

Heating oil futures also surged, hitting a session high of $1.12 cents a gallon, a gain of 2.07 cents on the day, before slipping back to $1.106 a gallon.

money.cnn.com February 21, 2003: 2:50 PM EST By Chris Isidore, CNN/Money Senior Writer

NEW YORK (CNN/Money) - With gasoline prices rising across the nation to a near record high, cries of gouging are rising from consumer groups and public officials, although petroleum officials argue that pump prices are justified by the rise in crude oil prices.

Unleaded gas prices averaged $1.663 a gallon in a survey by the American Automobile Association, up 13 percent from $1.469 just a month ago, and up nearly 50 percent from a year earlier. The current prices are near the survey's record high of $1.718 reached in June 2001.

Even without the start of a war between the United States and Iraq, those prices were poised to go higher as an oil storage facility fire in Staten Island, N.Y., sent gasoline futures more than 2 percent higher on the New York Mercantile Exchange, even though the fire seemed to involve a propane barge, not a gasoline refinery.

The AAA said it is concerned that the prices are being driven by speculation about the threat of war or terrorism, not merely rise in costs.

"While it is true the continuing loss of oil and gasoline exports from Venezuela and recent cold weather in much of the country have affected fuel inventories, nothing fully justifies the dramatic increase in gasoline prices experienced across the United States in the last month," an AAA statement said.

High gas prices are igniting calls for an investigation into possible gas gouging. CNNfn's Lisa Leiter has more on the rising gas prices.

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Florida Attorney General Charlie Crist and U.S. Sen. Charles Schumer, D-N.Y., have asked the Federal Trade Commission to look into the recent rise in gasoline prices. But while FTC spokesman Mitchell Katz said the agency is monitoring the situation, it does not have authority to act on price gouging problems, only on price fixing between competitors.

Crist said he doesn't know if there is gouging or price fixing going on, but he said that's the reason an investigation is needed.

"We want to have an examination," he said. "How can they find out if they're being anti-competitive if they don't give it a look? The oil companies aren't going to rush out and tell them they're being anti-competitive."

Crist said he has invited the major oil companies to send representatives to his office next Tuesday to discuss the gas prices. So far only ConocoPhillips (COP: Research, Estimates) has agreed to attend, he said. Related stories Police: Accident caused oil fire Oil prices soar Big Three slam fuel standards

American Petroleum Institute (API) CEO Red Cavaney has written to the AAA, criticizing the group for it allegations.

"Implications that the petroleum industry is engaged in price gouging and intentionally engaged in creating a gasoline shortfall are clearly false," Cavaney's letter said. "Current statistical data and historical industry trends belie such inflammatory claims."

While average gas prices are nearing an absolute high point, they still are below some historical spikes when adjusted for inflation. API figures show the high point in gas prices during the Iraq occupation of Kuwait in 1990 and 1991 was $1.86 a gallon in current dollars, while the all-time high was in 1981, during the Iran-Iraq war, when prices hit the equivalent of $2.70 a gallon in current dollars.

John Felmy, the chief economist for API, an industry group representing oil producers, said most gasoline prices are set by station owners, not the industry, based on their costs and local market prices.

"We can't speak for each of the 170,000 gasoline stations nationwide," Felmy said. "But it's clear that gasoline prices are up 29 cents a gallon because crude oil prices are up about 29 cents a gallon during the same period."

Oil analyst Fadel Gheit of Fahnestock & Co. said crude oil prices have actually risen much faster than pump prices over the last year, causing oil companies to lose money on the refining and marketing side of the business.

"All the refining and marketing operations in the United States last year lost money, huge money, hundreds of millions of dollars. Would they have done that if they could fix prices and gouge consumers?" he said. While the AAA survey shows pump prices up nearly 50 percent in the last year, crude prices have nearly doubled during that time. Crude prices are up the equivalent of about 24 cents a gallon in the last few months.

Gheit and Felmy also point out that the majority of the nation's gas stations are owned by independent businessmen who have the franchise, not the oil companies themselves. Gheit said that even the gas station owners have been squeezed by wholesale prices rising slightly faster than pump prices.

But the public officials have their doubts about the legitimacy of the prices.

"I don't know if they're gouging, and I don't want to pre-suppose anything," Crist said. "But the circumstances are certainly odd and the prices are historically high."

reuters.com Fri February 21, 2003 11:11 AM ET (The following statement was released by the ratings agency)

NEW YORK, Feb 21 - Standard & Poor's Rating Services said today that it has affirmed its ratings on Lyondell Chemical Co., including its 'BB' corporate credit rating, and removed the ratings from CreditWatch following indications that business disruptions related to reduced crude oil deliveries from Venezuela to one of Lyondell's affiliates, 58.75%-owned Lyondell-CITGO Refining LP, would be limited in terms of the potential affect on Lyondell's credit profile. The current outlook is negative.

Standard & Poor's said that at the same time it revised its outlook on Houston, Texas-based Equistar Chemicals LP, which is 70.5%-owned by Lyondell Chemical Co., to negative from stable. Standard & Poor's affirmed its 'BB' ratings on the company.

"The ratings affirmation follows Lyondell's announcement that it has restored operating rates at Lyondell-CITGO to near-normal levels," said Standard & Poor's credit analyst Kyle Loughlin. "Earlier this year, Lyondell-CITGO's business was disrupted by a lack of crude availability from Venezuela's state owned oil company, PDVSA, related to a general strike against the Chavez administration. While cash distributions to Lyondell are expected to fall short of earlier expectations, despite Lyondell-CITGO's recent ability to obtain and process crude from alternative sources, it now appears that other credit concerns, such as the risk that Lyondell would find it necessary to use its credit capacity to support Lyondell-CITGO, will be resolved satisfactorily."

Standard & Poor's said that the Equistar outlook revision follows disappointing fourth quarter results, which underscore the ongoing challenges faced by petrochemical companies in the current operating environment. Equistar's operating profits declined sharply from the previous quarter as rapid increases to raw material costs eroded margins, while demand showed some weakness due to seasonal issues and economic malaise. "These results raise concern that anticipated improvements to the financial profile may be delayed further, particularly if geopolitical turbulence forestalls recent efforts to expand margins in the face of raw material pressures," said Mr. Loughlin. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

cbs.marketwatch.com By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:34 PM ET Feb. 21, 2003

NEW YORK (CBS.MW) -- A fire at a Staten Island fuel storage facility put U.S. energy supplies clearly in the spotlight Friday, pulling heating oil within pennies of its all-time high and natural gas to the highest price level seen in two years.

The "bottom line is that even without the fire, inventories are falling and tightening at a rapid pace," said Michael Armbruster, an analyst at Altavest.com. A fire "can only exacerbate that," he said.

Distillate inventories fell just about 4 percent in the last week, following three weeks of significant draws, Armbruster noted.

Market sources confirmed that more than 50 percent of the heating oil used in U.S. comes through the Arthur Kill waterway, separating New York's Staten Island and outlying New Jersey communities.

The fire erupted Friday morning, prompting the closing of the waterway while authorities conducted an investigation. New York Mayor Michael Bloomberg characterized it as an accident during a press conference.

"It is a vast storage and production site," said John Person, analyst with Infinity Brokerage Services, noting that the Arthur Kill area is a key artery for shipping fuel along the Eastern Seaboard and the Intracoastal Waterway.

On the New York Mercantile Exchange, heating oil for March delivery rose to an intraday high of $1.12 per gallon, pennies shy of the all-time futures high of $1.147 a gallon seen in April 1981, according to Alaron.com senior analyst Phil Flynn. The contract then fell back to close at $1.1085 a gallon, up by 4.98 cents, or 4.7 percent.

Other fuel contracts moved higher as well, including March natural gas, which rose as high as $6.70 per million British thermal units -- a level not seen since $7.10 reached in February 2001. It closed at $6.606, up 44.4 cents, or 7.2 percent.

Crude for April delivery touched $36 a barrel before easing back to close at $35.58, up 84 cents, while March unleaded gasoline closed at $1.012 a gallon, up 4.62 cents, after climbing as high as $1.017.

"Between the Iraqi situation, Venezuelan unrest, oil-worker union demands in Nigeria and now an explosion at a storage facility, the supply side of the energy equation continues to have nothing but bad luck," said Grady Garrett, chief trading strategist at EnergyTrendAlert.com.

The Port Mobil distribution terminal belongs to ExxonMobil (XOM: news, chart, profile) and reportedly has a capacity of 2 million barrels in 39 tanks, market sources said.

"In this volatile environment, anything that could be construed as having the potential to disrupt supplies will send prices higher," said Thorsten Fischer, an economist at Economy.com.

Fears of terrorism "probably caused some market overreaction," he added. Authorities have said there are no indications of terrorism.

ExxonMobil said the explosion occurred during the offloading of a barge containing 100,000 barrels of unleaded gasoline. At least one person was killed. See full story.

"The refinery explosion is a dramatic setback and one more event that will support the outlook for continued price advances in the energy complex," Person said.

Tight by any definition

The nation's crude inventories remain mired around 270 million barrels -- the minimum level required to keep refineries operating normally.

Early Thursday, the Energy Department said the nation's inventories of crude oil rose by 3.1 million barrels in the week ended Feb. 14, compared with the prior week. The American Petroleum Institute reported a 3.3 million-barrel decline in crude stocks.

But aggregate crude stocks stood at 272.9 million and 268.3 million barrels, according to the Energy Department and API, respectively.

And on a year-over-year basis, crude inventories are down more than 15 percent, the equivalent of 50.4 million barrels, the government report said. The previous week, the Energy Department reported its lowest level for inventories in 27 years -- just under 270 million barrels.

Distillate inventories declined by 3.2 million to total 107 million barrels, while gasoline supplies fell by 1.8 million to 210.7 million barrels, the API said.

The Energy Department reported a 4.6 million-barrel contraction in supplies of distillates, to 103.6 million barrels. And gasoline fell by 1.4 million barrels to 211.2 million barrels in the latest week. See full story.

In spite of supply-constricting developments in Venezuela and elsewhere, the Energy Department appears of the view that there is no shortage of crude oil, said Tim Evans, senior analyst at IFR Pegasus.

But Evans believes the Energy Department fears a further price spike and doesn't want to be blamed for contributing to it. "As they said in their report, the market is in 'a delicate balance' indeed," he told clients Friday.

'Very nervous' over Iraq

Further pinching on the supply situation, the market remains concerned that a U.S.-led war with Iraq is imminent.

"Traders are very nervous as prices are very high and the U.S.-Iraqi prewar diplomatic 'dance' seems to be reaching a crescendo," said EnergyTrendAlert.com's Garrett.

Infinity Brokerage's Person further emphasized the prospect of higher prices ahead by noting that "if supplies in a non-wartime environment are at nearly three-decade lows, what will happen if the U.S. does go into action?"

Cargo and oil shipments form the Middle East would be detained, causing delays of needed supplies and pulling prices even higher, he said.

Late Thursday, U.S. Defense Secretary Donald Rumsfeld told the PBS program "Newshour with Jim Lehrer" that U.S. troops are ready to attack Iraq if and as soon as President Bush gives the order. See Special Report: Countdown to War.

Supportive data for natural gas

In other energy trading, natural-gas futures hit fresh two-year highs on the back of the rally in petroleum futures and a larger-than-expected decline in natural-gas supplies. Renewed expectations for cold weather also provided a supportive backdrop.

Natural gas is certainty feeding off the rally in petroleum futures, said Altavest.com's Armbruster, but natural gas has its own tight supply situation to worry about.

U.S. supplies have fallen by about 1 trillion cubic feet in the last five weeks, he said.

The combination of declining inventories and falling production is pulling prices higher, said Armbruster, adding that there's "very good reason to look for natural gas to go significantly higher in next month or so."

On Thursday, the Energy Department reported a 203 billion cubic fall in inventories as of Feb. 14.

By two key measures, total inventories of 1.168 trillion cubic feet are significantly lower -- 868 billion cubic feet less than the year-ago level and 436 billion cubic feet below the five-year average, the government said.

IFR Pegasus was looking for a decrease of 150 billion to 170 billion cubic feet. A year earlier, stocks contracted by 124 billion cubic feet.

"It looks like there is enough cold in the forecast to also contribute to further market strength here," said IFR Pegasus' Evans.

The National Weather Service calls for below-normal temperatures in western states and the Northeast next week, he said, with above-normal temperatures seen as likely in the Southeast.

Also on Nymex, gold futures prices traded modestly lower Friday with traders focused on watching the U.S. dollar and developments overseas. See Metals Stocks.

In the equities arena, most oil-service shares traded higher. The Philadelphia Oil Service Index ($OSX: news, chart, profile) rose more than 3 percent. See Energy Stocks.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, closed at 248.1, up 0.7 percent on strength in the energy commodities. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

sg.biz.yahoo.com Friday February 21, 10:20 PM

LONDON (Dow Jones)--The Organization of Petroleum Countries won't activate its price-band mechanism and hike output under current conditions if its basket price remains above $28.00 a barrel for 20 consecutive trading days, OPEC sources said Friday.

Feb. 28 would be the 20th straight trading day since the clock started ticking on the group's price mechanism.

But an OPEC official said "the mechanism will only be used as a (price) reference at this time."

Thursday, OPEC's basket price was $31.48/bbl, above the group's preferred $22.00-$28.00/bbl price range.

Under the terms of OPEC's price band mechanism, the group has pledged to raise output by 500,000 b/d if its basket price stays above $28.00/bbl for 20 consecutive days.

The group has also said it will slash output by 500,000 b/d if the oil price stays under $22.00/bbl for 10 straight trading days.

But OPEC sources say there is little the group can do now to take the heat out of high oil prices which, they say, are mainly due to a political premium based on a possible U.S.-led military attack on Iraq.

"There is not a lot we (OPEC) can do now to bring prices down...by putting more oil into the market in January this didn't bring prices back into the range, " one senior OPEC source said.

At an emergency meeting in January, OPEC, excluding Iraq, pledged to raise its output ceiling by 1.5 million b/d to 24.5 million b/d, effective Feb. 1, in an attempt to lower high crude prices.

But oil prices have remained high as an attack on Iraq has become more probable and a nationwide strike in Venezuela paralyzed the country's oil output.

-By Sally Jones, Dow Jones Newswires; 44-20-7842-9347; sally.jones@dowjones.com