VIENNA, Austria – Crude oil futures (search) rose Tuesday as traders weighed the approach of the U.S. driving season amid expectations of building crude supplies.
Analysts said traders might be taking stock of the market, considering whether prices had gone low enough. Additionally — although OPEC production remains high — much of the output is high sulfur crude which takes more refining and thus can drive up gasoline prices, they said.
Light sweet crude for July rose 49 cents to $49.65 a barrel on the New York Mercantile Exchange (search). Brent crude rose 45 cents to $48.82 on the International Petroleum Exchange.
In New York on Monday, prices rose 51 cents despite an end to a weeklong refinery strike in France, a six-year high in U.S. oil inventories and rising production from the Organization of Petroleum Exporting Countries (search) — news that would normally send prices downward.
"There are plentiful supplies but there is an issue about quality," said John Waterlow of Wood Mackenzie Consultants in Edinburgh, noting that much of the extra production is high-sulphur Saudi crude. "It's easy to make gas from sweet light crude rather than heavy crude."
Gasoline futures rose more than 2 cents to $1.4200 a gallon on Tuesday, and heating oil gained more than a cent to $1.3810 a gallon.
Analysts remain concerned over aging U.S. refineries and their output when production is ramped up to meet summer demand. Refineries also begin to switch over to production of heating oil at the same time in preparation for winter.
Kurt Barrow, senior principal at Texas-based energy analysts Purvin & Gertz, focused on potential refining problems.
"Indications are that there is enough crude but the question is on refining capacity to get that crude or products out in a timely fashion," he said.
The American Automobile Association (search) predicted last week a record 36.9 million Americans will travel 50 miles or more this Memorial Day weekend, with nearly 85 percent leaving home by motor vehicle.
The AAA report was in contrast to a fresh report by the U.S. federal Energy Information Administration (search) which said high gas prices were taking a toll on demand.
The Energy Information Administration will release its midweek petroleum data snapshot on Wednesday, and analysts predict crude will build again but gasoline stocks are likely to fall.
"With the flood of crude imports unstopped, expectations were for the 14th crude build in 15 weeks at around 1.14 million barrels," said PVM Oil Associates of Vienna in its daily energy market report.
Prices have fallen about $9 since hitting an all-time high of $58.28 April 4. They would have to surpass $90 a barrel to breach the inflation-adjusted record hit in 1980.