Oil Prices Hold Above $65 Per Barrel
"However, OPEC's commitments this year have done little to ease runaway prices."
"High demand, blamed on China and the United States, has eaten into limited global excess capacity worldwide, resulting in a limited amount of spare crude to counter any unplanned production outage."
Thursday September 15, 7:07 am ET
By Edith Balazs, Associated Press Writer
Oil Prices Hold Above $65 After Report Shows Dip in Crude Stocks but Rise in Gas Inventories
BUDAPEST, Hungary (AP) -- Crude-oil prices rose Thursday, holding above $65 a barrel after U.S. petroleum data showed a decline in crude stocks but a rise in gasoline inventories -- suggesting that soaring prices are undercutting U.S. gasoline demand.
"The market is concentrating on the bigger picture, which shows that four major U.S. refineries are still out, the gasoline market is still pretty tight coupled with a further draw shown in yesterday's stock report," said Orrin Middleton, energy analyst with Barclays Capital in London.
Light, sweet crude for October delivery rose 31 cents to $65.40 a barrel in European electronic trading on the New York Mercantile Exchange.
Gasoline was up nearly a cent to $1.9450 a gallon, while heating oil rose slightly to $1.9285 a gallon.
On London's International Petroleum Exchange, October Brent crude gained 7 cents to $63.44 a barrel. Analysts expected the October contract to dip temporarily ahead of its expiration later Thursday.
OPEC's acting secretary general, Adnan Shihab-Eldin, told Dow Jones Newswires on Thursday that the Organization of Petroleum Exporting Countries would consider increasing its production ceiling by almost 2 percent at its meeting Monday.
"OPEC has committed itself to ensure there's adequate supply," Shihab-Eldin said, "so the president has put forward a proposal to add 500,000 barrels a day to the ceiling if the market calls for it."
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah told al-Arabiya television on Wednesday that he would push for the quota hike to ease a supply crunch and cool prices. However, OPEC's commitments this year have done little to ease runaway prices.
Shihab-Eldin said the cartel does not intend to alter its 2-year-old policy of allowing global inventories to build. The current ceiling for 10 of its 11 members, excluding Iraq, is 28 million barrels a day.
Crude prices spiked nearly $2 a barrel on Wednesday following the Department of Energy's weekly petroleum data snapshot, closing at $65.09 a barrel, around 50 percent higher than a year ago.
The report showed that while crude stocks fell 6.6 million barrels to 308.4 million barrels due to lower imports and output lockdowns after Hurricane Katrina, gasoline stocks grew a surprising 1.9 million barrels to 192 million commercially available barrels.
"It's hard to get a definitive where prices are going just because of Hurricane Katrina ... (But) the data did show that gasoline demand has slowed," said Commonwealth Bank commodities strategist David Thurtell from Sydney, Australia.
With the Northern Hemisphere winter approaching, market focus gradually shifts to distillates, as demand for heating fuels typically peaks during this period.
The Energy Department said distillate stocks, which group heating oil, jet fuel, kerosene and diesel, fell 1.1 million barrels to 133.3 million barrels, just ahead of the heating season.
Washington has already warned of rising home heating costs in the fourth quarter of the year, but lower stocks -- coupled with a biting winter -- could push prices for consumers even higher.
The petroleum inventories report over the past two weeks has been crucial in providing clues as to extent of damage cause by Hurricane Katrina, which plowed through the U.S. Gulf of Mexico coast at the end of August, striking at the heart of key oil production and import infrastructure.
The Interior Department said 58 percent of crude-oil production off the U.S. Gulf Coast remains shut down.
Refineries were operating at 87 percent capacity, reflecting the shutdown of four major refineries in Louisiana as a result of the hurricane, the EIA said. It is expected to be two to three months before those refineries, accounting for more than 900,000 barrels of daily production, are likely to be back in operation, officials said.
There are also signs that the U.S. economy may be slowing due to rising fuel costs. The U.S. government said retail sales fell 2.1 percent in August, even before Katrina hit, with auto sales plunging 12 percent. Industrial output last month was nearly flat, reflecting widespread shutdowns of oil platforms, refineries and chemical plants along the Gulf Coast.
Retail gasoline currently averages $2.94 per gallon across the United States, just days after self-serve regular averaged $3 for the first time ever.
High demand, blamed on China and the United States, has eaten into limited global excess capacity worldwide, resulting in a limited amount of spare crude to counter any unplanned production outage.
Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.
