NYMEX oil drops amid gasoline-led profit taking

Reuters, 05.27.03, 12:38 PM ET

NEW YORK, May 27 (Reuters) - NYMEX oil futures were lower midday on Tuesday after slumping gasoline led a bout of profit-taking as crude futures gave up early gains when resistance held under $29.60 for crude, traders said.

Crude futures reversed after prices rose overnight and early in Tuesday's session as traders returned from a long weekend to news of a renewed pledge from Saudi Arabia to cut June output to meet its OPEC quota amid tight U.S. inventories.

"Gasoline took us lower and natural gas has taken a fall, which didn't help." said a NYMEX floor trader. The trader added that support for July crude had been expected at $28.85, and that below $28.38 the contract could be looking to fall to test support at $27.50.

At 12:16 p.m. EDT (1616 GMT), NYMEX July crude was 50 cents lower at $28.66 a barrel, trading as high as $29.55, below the ACCESS high of $29.63 and last Wednesday's session peak at $29.60. The session low was $28.55. In London, the International Petroleum Exchange (IPE) July crude traded 46 cents lower at $25.78 a barrel.

NYMEX June gasoline was 2.95 cents lower at 87.70 cents, already well below support expected at 89.40 cents.

Gasoline futures on Friday reached 91.25 cents and the overnight high coming into Tuesday's session was 91.40 cents, the highest since April 21.

Traders said rainy, cold weather at the weekend, especially in the U.S. Northeast, helped give the market a dim view of the start for the summer driving-demand season.

The complex showed no upward response to news on Tuesday that BP <BP.L> (nyse: BP - news - people) was operating its European refineries below the full 1.54 million barrels per day (bpd) capacity. "The refineries are not running at maximum because of margins. But I can't say by how much," a company official told Reuters.

Industry sources say BP had cut crude runs by about 5 percent.

A Gulf source said on Monday Saudi Arabia would cut its June crude output to meet its quota agreed to in April. Venezuela's state-oil company chief said Monday his country was ready to cut more if OPEC decides to lower quotas further.

OPEC is set to consider output quotas again in Qatar on June 11. OPEC's policy will have to take into account the state of Iraq's oil industry as the cartel mulls the prospect of Iraq wanting to resume its place in OPEC's production and market share quota system.

Iraqi officials have said they hoped to resume exports in two or three weeks, with total production of 1.3 million to 1.5 million bpd by mid-June.

Support for products futures was also expected after Venezuela's Monday announcement that it would delay the export of reformulated gasoline from its giant Amuay-Cardon refinery until June.

U.S. inventory data from both the government and industry will be released on Thursday, delayed a day by the Memorial Day hiatus.

NYMEX June heating oil futures were 1.20 cent lower at 73.20 cents a gallon. Support is expected at 71.75 cents. NYMEX June natural gas futures were 20.9 cents lower at $5.910 per million British thermal units (mmBtu).

Copyright 2003, Reuters News Service