Currencies

[thepennyking]

Oil Slips as U.S. Mulls Waiving Gas Rules
Friday April 2, 9:16 am ET


LONDON (Reuters) - Oil prices slipped slightly on Friday and traders said the market remained subdued following news Washington is considering requests to temporarily waive gasoline specification rules that have contributed to fears for a supply crunch.
ADVERTISEMENT


A big U.S. crude build reported earlier in the week had set prices off on a gasoline-driven losing streak that has taken more than two dollars off the price of oil since a high on Wednesday.

New York light crude futures fell 14 cents to $34.13 a barrel. London Brent futures slipped 93 cents to $30.62 a barrel, catching up with a big fall late on Thursday on the New York exchange, which closed an hour later than the London market.

Fears for gasoline tightness have kept up the market for much of the last month, analysts said.

U.S. government figures showing commercial crude stocks rising to their highest level in 19 months, and gasoline inventories building to above year-ago levels, unwound some of those concerns, and helped U.S. gasoline futures ease about eight percent from a record high set on Wednesday, triggering bearish sentiment in the crude market.

Traders said skepticism about compliance had limited the impact of OPEC's (News - Websites) agreement on Wednesday to forge ahead with its April 1, million-barrel-per-day supply cut.

A Reuters survey last week of physical crude market participants showed OPEC members' cuts were likely only to meet about a third of the stated reduction in April.

Skeptics have also drawn attention to efforts by the United States to persuade cartel members to supply more oil to the market.

President Bush expressed disappointment at OPEC's decision to cut, and, signaling its support, Kuwait said it did not want to see prices rise any further.

OPEC members Kuwait and the United Arab Emirates had recommended to the cartel's Wednesday meeting that the group consider delaying tighter restrictions to allow oil prices to cool.

Much of the recent gasoline market tightness has been blamed on U.S. federal rules requiring refiners to blend dozens of different kinds of gasoline for various states.

Energy Secretary Spencer Abraham said on Thursday the U.S. Environmental Protection Agency was seriously considering requests from three states for temporary exemptions to requirements.

But some analysts said that the clean-burning fuel requirements were secondary to capacity problems and low stock levels in explaining gasoline prices.

"Our view is that even if some of these measures are introduced they will not help much in easing gasoline supply. This is because they do not address the central issues currently contributing to U.S. gasoline market tightness, namely low stock levels, accelerating demand and the inability of the U.S. refining system to respond to surges in demand for its products," Barclays Capital said.

"The big problems of low gasoline inventory and the inability of the US refining system to cope with surging demand still remain."