U.S. Reports Gasoline Supply Is Unchanged, Oil Prices Drop

Crude oil futures fell for a fourth session, led by gasoline, after an Energy Department report showed that U.S. supplies of the fuel were unchanged last week.

Crude Oil Falls After U.S. Reports Gasoline Supply Is Unchanged

Aug. 25 (Bloomberg) — Crude oil futures fell for a fourth session, led by gasoline, after an Energy Department report showed that U.S. supplies of the fuel were unchanged last week.

Gasoline inventories were at 205.7 million barrels. Fourteen analysts surveyed by Bloomberg expected a decline of 2.25 million barrels, according to the median of forecasts. Crude oil supplies fell 1.7 million barrels to 291.3 million in the week ended Aug. 20, the department said.

“You should have had a 2 million barrel draw in gasoline at this time of year,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York, which markets wholesale gasoline and heating oil. “The crude number wasn’t big enough to send us higher.”

Crude oil for October delivery was down $1.66, or 3.7 percent, at $43.55 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices fell as low as $43.22, the lowest since Aug. 5. Futures were 38 percent higher than a year earlier.

Oil for September delivery reached $49.40 a barrel on Friday, the last day the contract traded. It was the highest price since crude oil began trading in New York in 1983. The October contract has declined 8.6 percent since last Thursday.

“A lot of speculators were looking for the September contract to breach $50 a barrel, and when that didn’t happen a number of them sold,” said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut.

Gasoline for September delivery was down 6.73 cents, or 5.3 percent, at $1.193 a gallon in New York. Prices fell as low as $1.19, the lowest since July 1. Futures were 7 percent higher than a year earlier.

The U.S. government’s weekly inventory report was released at 10:30 a.m. Washington time.

Gasoline Demand

Gasoline demand fell 1 percent to 9.4 million barrels a day last week, the report showed. Consumption of all petroleum products rose 1.9 percent to 20.9 million barrels a day, the highest since the week ended Feb. 20.

“There was incredible demand last week and it doesn’t look like it will go away anytime soon,” said Phil Flynn, senior energy trader for Alaron Trading Corp. in Chicago. “High prices have yet to really hurt demand because of the growing economy. If demand continues to run at this rate we will have a big crunch in supply when refiners begin to perform maintenance.”

Refiners boosted operating rates last week, according to the department. Refineries begin to perform seasonal maintenance next month after demand for gasoline eases with the Labor Day holiday.

Technical Traders

A Fibonacci graph of the move in oil futures from lows in July pointed to $45 as a support level for oil, said Bill O’Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. The decline in prices accelerated after falling below $45. The next support level is $42, O’Grady said.

Fibonacci analysis, named for the 13th century mathematician, helps traders determine whether gains or losses will continue.

“There is major, major support between $41 and $42,” O’Grady said. “I’m agnostic about technicals but when the fundamentals aren’t giving a clear signal, you have to use them.”

Iraq doubled the flow from its southern fields to Basra and Khor al-Amaya in the Persian Gulf last weekend. More than 90 percent of Iraq’s oil exports flow from the south through the Persian Gulf.

Iraq is resuming oil sales from its northern fields through the Mediterranean for the first time since May after pumping more than 5 million barrels to the Turkish port of Ceyhan, said an Iraqi oil official by telephone from Baghdad, who didn’t want to be identified. More oil is being pumped to storage tanks, the official said, without giving more details.

It’s the fourth time this year that Iraq is selling oil through Turkey, each time having to halt exports because of attacks against its pipelines.

OPEC Production

Nigeria, Africa’s largest oil producer, said the Organization of Petroleum Exporting Countries may decide at a meeting next month to boost production to help compensate for the disruption in supplies from Iraq.

Oil prices are being driven by speculation and concern about disruptions in Iraq, said Edmund Daukoru, Nigeria’s presidential adviser on oil and its most senior OPEC delegate.

“What we see is the speculative funds are a big driving force, the situation in Iraq is a big driving force,” Daukoru said. “We have to carefully analyze the situation before we announce a further increase because without identifying the fundamental forces, simply increasing output will not be very helpful. I think the market is well supplied.”

In London, the October Brent crude-oil futures contract was down 1.62 cents, or 3.8 percent, at $40.70 a barrel on the International Petroleum Exchange. Brent was 37 percent higher than a year earlier.

To contact the reporter on this story:
Mark Shenk in New York at mshenk1-AT-bloomberg.net.

To contact the editor responsible for this story:
Robert Dieterich at rdieterich-AT-bloomberg.net.

Last Updated: August 25, 2004 14:47 EDT