Market watch: Oil prices decline with conflicting reports of US inventories

ogj.pennnet.com By OGJ editors

HOUSTON, Feb. 21 -- Futures prices for oil and petroleum products fell Thursday as traders grappled with conflicting reports on US oil inventories by the US Department of Energy and the American Petroleum Institute.

DOE officials said Thursday that US oil stocks rose by 3.1 million bbl to 272.9 million bbl last week, while API reported those inventories fell by 3.34 million bbl. But since both indicated a significant increase in US imports, analysts said, traders apparently assumed there were errors in the API figures that would be corrected later.

DOE estimated that weekly crude imports surged to 8.8 million b/d, the highest level in 8 weeks.

Increased supplies of heavy crude from the Persian Gulf producers and Venezuela, coupled with extensive turnaround activity among US Gulf Coast refineries, are widening price differentials between light and heavy, sweet and sour oils.

"This will improve coking margins for several major refiners," said analysts Thursday at UBS Warburg LLC, New York.

Other observers said the oil market also gave up some of its war premium as reports leaked out that military action against Iraq might be delayed by some weeks as the US tries to secure more international support for such action.

Market prices The March contract for benchmark US light, sweet crudes dropped 37¢ to $36.79/bbl Thursday on the New York Mercantile Exchange, while the April position fell 92¢ to $34.74/bbl. Heating oil for March delivery plunged 4.06¢ to $1.06/gal. Unleaded gasoline for the same period lost 3.64¢ to 96.58¢/gal on NYMEX.

However, the March natural gas contract inched up 2.8¢ to $6.16/Mcf. "The market opened steady but soon jumped higher after the storage report was released, hitting a daily high of $6.22(/Mcf)," analysts reported Friday at Enerfax Daily. But the price then backed off as a result of profit taking to end near its opening level.

The US Energy Information Administration said 203 bcf of gas was pulled out of storage last week (OGJ Online, Feb. 20, 2003).

"The record levels of regional draws reported by the EIA since the start of 2003 have taken a whopping 1.2 tcf from storage and left capacity at an extremely bullish 36% by mid-February, compared with 59% (during the same period) in 2002 and a 42% 3-year average," said analysts Energy Security Analysis Inc.

They said, "By the end of the winter heating season, US natural gas storage levels could drop as low as 19%, the same bullish levels seen in the spring of 2001."

In London, the April contract for North Sea Brent oil fell 77¢ to $31.56/bbl on the International Petroleum Exchange. The March natural gas contract gained 5.2¢ to the equivalent of $2.81/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 47¢ to $31.48/bbl Thursday.