Gas prices edge up; oil prices fall as U.S. halts purchases
Associated Press
NEW YORK — Gasoline futures prices edged higher on continuing supply concerns today while oil prices extended their declines after the government said it would suspend oil purchases for the Strategic Petroleum Reserve.
June gasoline futures bobbled between gains and losses before rising 1.5 cents to settle at $2.2476 a gallon on the New York Mercantile Exchange.
Meanwhile, prices at the gas pump are flirting with $3. The national average retail price of a gallon of gasoline rose 1.4 cents to $2.991 today, according to AAA, reflecting the recent advance in the futures market.
Analysts think the market for gasoline is likely to remain tight and that prices will therefore stay high. Many analysts are concerned gasoline supplies won’t be adequate to meet peak demand during the summer driving season, which begins Memorial Day weekend.
And that means prices will likely continue rising until gasoline inventories increase.
“The market is fundamentally bullish,” said Jack Hunter, an energy trader at FC Stone Group, in Kansas City, Mo. “I definitely think this market is still spooked by gasoline supplies.”
Light, sweet crude for June delivery fell 49 cents to settle at $63.19 a barrel on the Nymex after falling 72 cents Wednesday.
Heating oil futures fell less than a penny to settle at $1.8453 a gallon, while natural gas prices gained 21.7 cents to settle $7.947 per 1,000 cubic feet.
The Brent crude contract for June delivery fell 20 cents to settle at $66.05 a barrel on the ICE Futures exchange in London.
Hunter said the spring rally in oil and gasoline prices was largely due to the Department of Energy’s plan, announced in January, to buy up to 129,033 barrels of crude oil a day. The department today rejected bids for the purchase of up to 4 million barrels of crude as too high, and said it will suspend all purchases of oil for the reserve until at least after the summer driving season.
“The market’s really selling off (on that news),” Hunter said.
Investors also sold oil on word that Belgian oil workers have given preliminary approval to a new contract, said Andrew Lebow, senior vice president at Man Financial. The workers run refineries that process 800,000 to 1 million barrels of oil a day.
“It looks like the (potential) Belgian strike is going to be settled,” Lebow said.
Oil prices initially rose this morning after more kidnappings of oil workers in Nigeria, Africa’s largest oil producer, raised worries about supplies. But several workers were later released, giving traders additional reason to sell.
Hunter thinks Nigerian unrest is already built into the market, meaning oil prices have already risen on the expectation that violence in the African nation will be a regular occurrence.
Gasoline and oil futures sold off Wednesday after the U.S. Energy Information Administration’s weekly inventory report showed a 1.1 million barrel drop in gasoline stocks last week, and a 1.1 million barrel increase in crude oil stocks, both in line with expectations. Refinery utilization edged up 0.5 percentage point to 88.3 percent from 87.8 percent last week, the report showed.
Little in the report indicated a major change to the market’s fundamentals, analysts said.
“You may see some further profit-taking,” said Lebow, “but I don’t think the market is heading for a sustained downturn.”
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