Associated Press
A truck drove past a gas station along Interstate 70 near Maple Hill, Kan. Wednesday.
THE WALL STREET JOURNAL: Crude Pierces the $115 Mark
By BRIAN BASKIN
April 17, 2008; Page C12
Crude-oil futures breached $115 on oil product supply fears sparked by a U.S. report showing large decrease in gasoline inventories.
Light, sweet crude for May delivery on rose $1.14, or 1%, to $114.93 a barrel, a record, on the New York Mercantile Exchange Wednesday after rising as high as $115.07 intraday. This is the third record in as many trading sessions.
Gains made by benchmark gasoline futures, which rose to a record for the fifth time in a row, outpaced those of crude. Reformulated-gasoline blendstock climbed 5.8 cents, or 2%, to $2.939.
In addition to the larger-than-expected drop in U.S. gasoline stockpiles last week, data released by the federal Energy Information Administration showed that refinery utilization hit a two-year low. Refinery utilization is a metric that shows how much processing capacity refiners are using. Several refiners have said they are cutting production rates because their profits are being squeezed by skyrocketing crude-oil costs.
Gasoline stockpiles fell by 5.5 million barrels in the week ended April 11. Analysts had expected a draw of 1.7 million barrels. Refinery utilization fell 1.6 percentage points to 81.4% of capacity. Analysts had expected utilization to increase.
While gasoline inventory levels remain relatively high for this time of year, traders fear the cutbacks by refiners could leave the products market inadequately supplied ahead of the summer. Fewer gallons of gasoline and diesel coming into the market could mean higher prices at the pump.
“A lot of people are looking at this utilization number and just trying to figure out how on earth we can be [so far] below the seven-year average for this time of year,” said Peter Beutel, president of Cameron Hanover, a trading advisory firm. “We’re going to need the gasoline this summer.”
Oil prices have risen on weakness in the dollar, which has caused some investors to put money in commodities as a hedge, as well as concerns about tight supply capacity in the face of rising demand. Heating oil and gasoline have led the energy rally, with low refinery utilization in the U.S. and strong demand for distillates from Europe and Asia sending product and crude futures to repeat records.
Crude-oil inventories fell by 2.3 million barrels, the EIA said.
“We need a steady dollar and we need refinery utilization at 90% of capacity right now in order for this market to have any chance of selling off,” Mr. Beutel said.
Write to Brian Baskin at [email protected]
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