Oil prices fall as U.S. inventories improve

www.usatoday.com Posted 2/20/2003 12:23 PM     Updated 2/20/2003 9:15 PM By James R. Healey, USA TODAY

The USA had more crude oil on hand last week than the week before, the government reported Thursday, an unexpected development that clubbed oil prices down from what had begun to seem like unassailable heights.

West Texas Intermediate (WTI) crude for March delivery slid 37 cents from a 29-month high to $36.79 at the end of trading Thursday in New York. That was the first decline in seven sessions.

March oil contracts expired Thursday. April crude closed at $34.74, down 92 cents.

The record closing price for WTI futures is $40.42 on Oct. 10, 1990, equivalent to $55.64 today because of inflation.

In London, benchmark Brent crude fell 77 cents to $31.56.

Behind the hubbub:

The Energy Information Administration said 272.9 million barrels of crude were available in the USA, not counting the 599.3 million locked in the Strategic Petroleum Reserve. That was a slight improvement from 269.8 million the previous week, which was lowest since 1975.

The gain, from rising imports, was 3.1 million barrels, leaving inventories close to the 270 million barrels considered necessary to prevent refinery interruptions.

"It does indicate a tight market," said Rayola Dougher at the American Petroleum Institute, an oil industry trade organization.

API's weekly report, which coincides with EIA's, uses different methods and showed crude-oil inventories down to 268.3 million barrels from 271.6 million a week earlier. The differences with EIA are insignificant, she said.

Dougher said the 270 million was calculated in the 1980s and probably is less important now. "That 270 figure is not a magic number. Since then, the industry's much better at inventory control and computerization. We don't know how low it could go" without interruption nowadays.

Regardless, the inventories are about 50 million barrels lower than a year ago, EIA said, cautioning that the situation is acute in the Midwest, where oil inventories are "the lowest ever."

Average pump price for regular is $1.665, up from $1.661 overnight, motorists club AAA reported Thursday. Diesel is $1.751, off its record high of $1.755 Tuesday.

Concern that the EIA report was a blip instead of the start of a trend toward higher inventories prompted price rebounds overnight in foreign markets, the Oil Price Information Service reported.