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Oil Rises to 3-Week High After Shell Shuts Texas Refinery Units

BLOOMBERG: Oil Rises to 3-Week High After Shell Shuts Texas Refinery Units

1 June 2004

 

June 1 (Bloomberg) — Crude oil rose to its highest in three weeks in New York after Royal Dutch/Shell Group shut two gasoline- making units at a refinery in Texas, heightening concern about auto fuel supply during the U.S. holiday season.

 

Oil rose for a seventh day, to the highest since May 10, after a pipeline rupture caused Shell to shut reformer units at Deer Park, the sixth-largest U.S. refinery. Plants usually run at more than 95 percent of capacity at this time of year to meet peak fuel demand for the vacation season that began last weekend.

 

“The shutdown has caused upward tension in the oil price, particularly given the U.S. summer driving season is about to start, which will trigger an upward spike in oil demand,” said Angus Geddes, a co-founder of Fat Prophets, an equity research and fund management company in Sydney.

 

Crude oil for July delivery rose as much as 31 cents, or 0.6 percent, to $52.28 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $52.28 at 1:55 p.m. Singapore time.

 

Gasoline for June delivery rose as much as 1.02 cents, or 0.7 percent, to $1.4772 a gallon on the New York Mercantile Exchange.

 

Yesterday, the July oil contract rose 12 cents, or 0.2 percent, to $51.97 a barrel, the highest closing price since May 10. Oil traded as low as $50.90 yesterday following reports Saudi Arabia’s King Fahd’s health was improving and as the dollar rose to its highest against the euro since Oct. 13, raising the cost of oil for buyers outside the U.S.

 

Consumption

 

U.S. gasoline consumption rose to 9.4 million barrels a day in the week ended May 20, the highest this year, according to the Energy Department. Oil prices may rise further if the department’s report this week shows another decline in the nation’s crude oil stockpiles, said Chris Mennis, owner of oil trader New Wave Energy in Aptos, California.

 

“If we don’t see a gigantic build in products that means that demand is so strong it’s using up all the crude being refined into products,” Mennis said.

 

The July futures contract jumped 6.6 percent last week, the largest weekly gain in a month, amid forecasts for record U.S. vacation travel during the summer.

 

The contract gained 2.6 percent on May 25, when the Energy Department’s weekly report showed the nation’s crude oil stockpile fell 1.7 million barrels, the first decline in five weeks. Supplies the week ended May 20 were 7.8 percent higher than the five-year average for the period. Gasoline supplies rose just 609,000 barrels the same week.

 

Stretching Capacity

 

The Energy Department will publish its next report at 10:30 a.m. in Washington on June 2. The report is a day later than usual because of the Memorial Day holiday.

 

“Fresh highs for oil prices are likely as the market is now pricing in the growing likelihood that oil demand will rise to a level that will severely stretch current capacity limits in both crude oil and refining later on this year,” Kevin Norrish, an analyst at Barclays Capital in London, said in a research report.

 

Consumer confidence in the U.S., the world’s biggest user of oil, unexpectedly rose in May, suggesting an improving labor market and that lower fuel prices are helping buoy Americans’ outlook, a private survey showed. The Conference Board’s index of consumer sentiment increased to 102.2 during the month from 97.5 in April, the New York-based research group said yesterday.

 

“All indicators point to a tight oil market,” said A.F. Alhajji, an energy economist at Ohio Northern University. “The probability of another spike in oil prices is still very high.”

 

To contact the reporter on this story:

Sri Jegarajah in Singapore at [email protected];

Gavin Evans in Wellington, New Zealand at [email protected]

 

http://www.bloomberg.com/apps/news?pid=10000086&sid=aA0xOSPBi7gU&refer=latin_america

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