Crude Futures Soar on Inventory Declines

www.newsday.com By Associated Press January 15, 2003, 6:11 PM EST

NEW YORK -- Crude oil futures rose sharply Wednesday after data showed a larger-than-expected weekly decline in American inventories.

Data released by the Energy Information Administration earlier Wednesday showed that U.S. crude oil stocks fell by 6.4 million barrels to 272.3 million barrels as refiners unexpectedly stepped up production by 1.1 percent to 92.3 percent of operating capacity.

The decline came despite a slight increase in imports. The data showed that imports rose by 200,000 barrels a day to 8.489 million barrels a day. Despite last week's increase, however, imports are about 1 million barrels a day lower than a month ago, an EIA analyst said.

Separately, the American Petroleum Institute reported that crude oil stocks fell by 3.264 million barrels to 272.236 million barrels last week, as imports tumbled by 676,000 barrels a day to 8.27 million barrels a day.

Despite the disparity in import figures, traders seized on the data as evidence that the seven-week strike in Venezuela continues to cut into U.S. oil inventories.

It was "the kind of report we thought it would take to keep prices on their upward path," IFR Pegasus energy analyst Tim Evans said of the EIA report.

On the New York Mercantile Exchange, February crude surged 84 cents to close at $33.21 a barrel, just shy of a two-year high of $33.65 a barrel hit last month.

Heating oil and gasoline futures rallied in tandem with crude despite bearish petroleum-product stock data.

February heating oil rose 1.70 cent to close at 90.86 cents a gallon, while February gasoline futures advanced 1.27 cent to close at 90.43 cents a gallon.

On London's International Petroleum Exchange, February Brent futures rose 61 cents to close at $31.22 a barrel.

Natural gas for February delivery surged 32.3 cents to settle at $5.430 per 1,000 cubic feet.

The rally in heating oil and gasoline futures was surprising given that the data indicated that refiners continued to build petroleum-product stocks.

The Energy Department report showed that gasoline stocks rose by 5.8 million barrels to 215.6 million barrels, while distillate stocks, which include heating oil and diesel fuel, grew by 2.6 million barrels to 132.3 million barrels.

The API report painted a somewhat mixed picture. It showed that while gasoline stocks swelled by 4.399 million barrels to 215.04 million barrels last week, distillate stocks posted a decline of 104,000 barrels to 134.28 million barrels.

Most analysts surveyed had forecast a moderate decline in both gasoline and distillate stocks.

"Even with the build of nearly six million barrels in gasoline, traders were a lot more interested in what was going on in the crude oil," said Peter Beutel, an analyst at Cameron Hanover in Connecticut. "The bottom line is that the major fundamental factors are still in effect, those being the strike in Venezuela and fear of a war with Iraq."

There was little indication Wednesday that either Iraq or Venezuela is going to go away as a bullish factor in the market.

The U.S. made a formal request Wednesday for limited help from the North Atlantic Treaty Organization in the event of a war with Iraq.