Thursday's Commodities Roundup

Posted on Thu, Jun. 05, 2003 The News Sentinel-Associated Press

NEW YORK - Crude oil and petroleum products futures rallied Thursday as traders covered short positions established following bearish inventory figures released a day earlier.

Wednesday's sell-off came after government and industry data showed across-the-board builds in U.S. petroleum inventories for the week ended May 30.

Crude oil stocks rose by 2.8 million barrels to 289 million barrels, gasoline inventories grew by 2.3 million barrels to 207.3 million barrels, and distillate stocks, which include heating oil and diesel fuel, rose by a larger-than-expected 3 million barrels to 104.5 million barrels, the Energy Department reported.

But despite the builds, inventories remain below year ago levels, just as the high-demand U.S. summer driving season gets under way. Low inventories leave the market exposed to price spikes.

"When you think about it, supplies are still very tight," said Phil Flynn, a trader and analyst at Alaron Trading Corp. in Chicago.

At the New York Mercantile Exchange, nearby July crude oil futures rose 69 cents to close at $30.74 a barrel.

At London's International Petroleum Exchange, July North Sea Brent futures ended the session with a gain of 84 cents at $27.65 a barrel.

July heating oil futures jumped 2.01 cents to 77.23 cents a gallon, while July gasoline futures climbed 2.09 cents to settle at 88.52 cents a gallon.

Natural gas for July delivery rose 14.6 cents to settle at $6.521 per 1,000 cubic feet.

A slew of news reports helped boost the rally, traders and analysts said.

As oil prices were rallying, Venezuela's state news agency reported that the oil ministers of Venezuela, Mexico and Saudi Arabia will meet Monday to discuss cooperation between OPEC and non-OPEC oil producing nations.

Venezuela's oil minister Rafael Ramirez plans to meet his Saudi counterpart Ali Naimi and Mexico's oil minister Ernesto Martens in Madrid, Spain. Ramirez will later meet with the oil minister of Norway, another key non-OPEC oil producer.

"This is a very important meeting because it allows us to study the world oil markets and the oil prices," Ramirez said.

Venezuela and Saudi Arabia belong to the Organization of Petroleum Exporting Countries; Mexico does not. The three countries often meet to coordinate policy ahead of OPEC meetings.

Ramirez also said he would meet with Norwegian officials before the OPEC conference but he did not give a date. Norway, another independent producer, also often collaborates with OPEC's policies.

The meeting of the three oil ministers comes just before the meeting in Doha, Qatar, June 11.

OPEC in April decided to hike the ceiling to 25.4 million barrels a day while at the same time, it pledged to remove 2 million barrels a day from the market.

OPEC officials haven't said whether they intend another round of production cuts, and talk in the market is mostly that the cartel won't reduce output.

Analysts say that the recent price spike has mitigated the need for another OPEC output cut.

Separately, a fire at a Northern Natural Gas Co. natural gas pipeline early Thursday morning destroyed one of two buildings housing a compressor station in an isolated part of far West Texas, officials said Thursday.

The news helped boost natural gas and heating oil futures at the Nymex, traders said.