Published March 02, 2005
NEW YORK – U.S. crude oil prices rose to a fresh four-month high over $53 a barrel Wednesday as refinery problems in Texas propelled gasoline up to an all-time peak.
U.S. light crude futures on the New York Mercantile Exchange (search) touched $53.09 per barrel, a level not seen since late October, before settling up $1.37 to $53.05. London Brent on the International Petroleum Exchange (search) advanced $1.11 to $51.22 a barrel.
The gains tracked a surge in U.S. gasoline futures to a record high of $1.4850 a gallon.
"This market simply wants to go up," said Kyle Cooper, an analyst with Citigroup Global Markets.
"Gasoline is up because of the refinery issues in Texas, which means there will be a scramble for product in the (U.S.) Gulf Coast," said Ed Silliere, an analyst at Energy Merchant.
An early morning fire at Western Refining Co.'s (search) refinery in El Paso, Texas, shut a gasoline production unit for an undetermined amount of time, a refinery spokesman said.
Elsewhere, a coking unit at Lyondell Citgo's (search) Houston refinery was shut down due to a mechanical failure and a gasoline unit at BP's (BP.L) Texas City refinery was taken down briefly on Tuesday.
The market becomes more sensitive to problems with gasoline production in the world's largest energy consumer in the approach to spring as dealers anticipate rising motor fuel demand for the looming vacation season.
The gains throughout the petroleum complex came despite a bearish inventory report from the U.S. Energy Information Administration showing increases last week in national crude and gasoline stockpiles, which have each amassed a roughly 9 percent year-on-year surplus.
The EIA's weekly report showed distillate inventories down in the same week, but holding in the normal range, and a decline in refinery activity of nearly one percentage point to 89.3 percent of capacity.
Traders have noted substantial buying interest seizing on every downturn the market has taken of late, with many dealers attributing the bullishness to big money investment funds.
"Each time prices showed signs of moving down, the dips get bought fairly quickly and they go back up," said Tony Nunan, manager at the petroleum section of Mitsubishi Corp.
He added that the bullish underlying fundamentals continued to support the lofty prices.
"It would seem that the market is more focused on the macro factors like OPEC (search) having little spare capacity, strong demand from the U.S., China and India. This is the best chance for prices to fall and if they don't fall now, I would hate to think what prices will be later."
High prices have led OPEC producers to back away from talk of a possible output cut for the second quarter.
Kuwait, Qatar, Venezuela and Indonesia have come out in favor of keeping OPEC's formal output limits unchanged when the cartel meets in Iran on March 16.
Acting Secretary-General Adnan Shihab-Eldin has said OPEC saw a growing consensus that a $40-50 range was sustainable, backing up comments by Saudi Oil Minister Ali al-Naimi last week that prices could stay in that range this year.