Crude gains $1.15 after Saudi bombing

By Hil Anderson <a href=www.upi.com>UPI Chief Energy Correspondent From the National Desk Published 5/13/2003 5:37 PM

LOS ANGELES, May 13 (UPI) -- The terrorist bombs that ripped through Riyadh, Saudi Arabia, overnight helped send the price of crude in New York more than $1 higher in New York Tuesday as more bullish sentiment was added to markets already buoyed by talk of further OPEC production cuts and the usual concerns about the summer gasoline supply in the United States.

June crude broke through $28 per barrel on the New York Mercantile Exchange and settled at $28.50 per barrel, $1.15 higher on the day and the highest level since mid-April. London's International Petroleum Exchange settled $1.01 higher at $25.90 per barrel.

While traders were understandably concerned about the short-term impact of the bombing, Saudi oil installations were not affected and crude markets were already in a bullish mood before the deadly Riyadh explosions took place.

The United States continues to experience relatively low inventories levels of crude and gasoline, and the bombing comes just a day before the oil industry and the U.S. Energy Information Administration release their closely watched weekly supply reports.

Also, when OPEC meets on June 11, the cartel is expected to consider further cuts in production to offset the deflation of prices seen since the start of the war in Iraq. Cuts among the some of the 10 OPEC nations other than Iraq totaled 440,000 barrels per day, but they were virtually offset by increases by other member nations.

"For all intents and purposes the current ceiling became redundant when OPEC announced at its April 24 meeting its new higher ceiling of 25.4-mil bpd," said John Kingston, director of oil for Platts, an oil industry publication that tracks OPEC's output. "The new ceiling, even though it doesn't come into effect until June, has become the new target for OPEC."

The production figures compiled by Platts showed production increases of 390,000 bpd in Venezuela, which had been virtually shut down earlier this year by labor and political strife.

At the same time, the major cuts were led by Saudi Arabia's 260,000 bpd reduction flowed by smaller cuts by Indonesia, Iran and Nigeria.

The prospect of less crude on the market comes at a time when U.S. refiners have been hurriedly producing gasoline for an anticipated record demand during the summer driving season that unofficially begins on Memorial Day weekend.

Analysts see enough gasoline on hand and high enough production levels to avoid any sharp increases in retail prices, although, as always, unexpected disruptions could always lead to regional shortages and result in sharp spikes upward.

"Domestic gasoline markets could tighten again if world oil markets fail to continue to ease or if domestic refining and distribution facilities are disrupted in some way," the U.S. Energy Information Administration said in an analysis released late last week.

The EIA predicted that the lower crude costs would keep the nationwide average price of a gallon of regular at around $1.46 per gallon, less than 10 cents over last summer.

"The current gas price average is an encouraging development as Americans prepare for the start of the summer driving season," said Dawn Duffy, a spokeswoman for AAA. "These pump prices reflect a decline in the price of crude oil since the start of Operation Iraqi Freedom, a gradual increase in oil and gasoline production from Venezuela, and rising gasoline imports from Europe."