NDTV Profit - 20/4/2006
Oil prices approached record intraday highs after weekly data showed a hefty decline in U.S. gasoline inventories.
This raised worries that refiners don't have an adequate inventory cushion ahead of the peak summer driving season.
Light, sweet crude for May delivery rose 12 cents to $72.29/barrel in Asian electronic trading on the New York Mercantile Exchange.
This is just below the record intraday high of $72.40/barrel on Wednesday, when the contract settled at a record $72.17, an increase of 82 cents.
"The market is sizzling" said energy analyst Victor Shum of Purvin & Gertz in Singapore. "The gasoline stockdraw was large and it has raised concerns over gasoline supply in the US, which is really what's behind the price surge," he added.
In its weekly report, the U.S. Energy Department said the nation's supply of gasoline shrank by a larger-than-expected 5.4 million barrels last week to 202.5 million barrels.
The decline, the seventh in as many weeks, pushed gasoline stocks to 4.6 percent below year ago levels, their lowest level since November.
Gasoline inventories typically decrease this time of year as refiners shut down their plants to perform maintenance ahead of the summer driving season.
There is additional worry, however, about summer gasoline supplies because of the prospect of tight supplies of ethanol.
Ethanol is needed in increasing amounts as refiners phase out their use of methyl tertiary butyl ether, or MTBE, which has been found to contaminate drinking water.
The US Energy Department report also showed that crude oil stocks fell by 800,000 barrels last week to 345.2 million barrels, while distillate stocks, which include heating oil and diesel fuel, fell 2.8 million barrels.
Shum said the surprise decline in crude stocks could in fact be good news.
"The crude stock draw was unexpected, but what it suggests is that US refineries are starting to come back on after maintenance, and that they're starting to build up product supply," he said.
However, in a sign that consumers may be responding to higher prices, the report also showed that average daily gasoline demand since the start of the year is up 0.9 percent, compared with an increase of 1.4 percent during the same period in 2005.
Traders also are anxious that U.S.-led efforts to stop Iran, OPEC's second-largest member, from pursuing a suspected nuclear weapons program could lead to a disruption in Persian Gulf supplies.
Gasoline futures lost 0.19 cents to $2.2375 a gallon (3.8 liters), while heating oil prices rose 0.27 cents to $2.0650 a gallon. Natural gas prices fell 5 cents to $8.142 per 1,000 cubic feet.