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Crude Oil, Gasoline Jump Amid Decline in Motor Fuel Inventories
Mark Shenk in New York


Dec. 29 (Bloomberg) -- Crude oil rose above $60 a barrel and gasoline surged in New York amid concern that falling U.S. inventories of the motor fuel will leave stockpiles inadequate to meet demand.

``The strength in gasoline is supporting crude oil,'' said Phil Flynn, vice president of risk management at Alaron Trading Corp. in Chicago. ``It is a little early to be concerned about gasoline, but supplies have continued to trail year-ago levels week after week. Supplies are tight even with the high production rate and imports.''

Gasoline supplies fell 1.2 million barrels to 202.9 million in the week ended Dec. 23, according to the Energy Department. A 250,000 barrel decline was expected, according to the median of forecasts by 13 analysts surveyed by Bloomberg. Inventories of crude oil rose 118,000 barrels to 322.6 million. Stockpiles were forecast to drop 500,000 barrels.

Crude oil for February delivery rose 50 cents, or 0.8 percent, to $60.32 a barrel on the New York Mercantile Exchange, the highest close since Dec. 14.

Oil averaged $56.69 this year, $17 more than in 2004 and the highest in two decades of New York trading. Futures are up 39 percent this year. Oil reached a record $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck Louisiana and Mississippi.

Gasoline for January delivery jumped 6.13 cents, or 3.9 percent, to close at $1.6524 a gallon in New York, the highest since Oct. 25. Futures surged to a record $2.92 a gallon on Aug. 31. Prices are up 52 percent this year.

The department released its weekly report on petroleum inventories at 10:30 a.m. in Washington. The release was delayed by a day because government offices were shut on Dec. 26 in observance of the Christmas holiday.

Five-Year Average

Gasoline supplies were 4.5 million barrels, or 2.2 percent, below the five-year average for the date, the department said.

Refineries increased production of the motor fuel 173,000 barrels a day to an average 8.9 million last week. Imports of the fuel have averaged 1.1 million barrels this quarter, up 33 percent from a year ago.

The regular gasoline price at the pump, averaged nationwide, rose 0.7 cent to $2.187 a gallon yesterday, the AAA said today on its Web site. Prices are down 28 percent from the record $3.057 a gallon on Sept. 2, according to the AAA, the nation's largest motorist organization. Pump prices are 23 percent higher than a year earlier.

Crude Oil Supplies

Crude oil supplies are 35.1 million barrels, or 12 percent, above the five-year average, according to the department. Heating oil stockpiles are 900,000 barrels, or 1.7 percent, above the five-year average.

Supplies of distillate fuel, a category that includes heating oil and diesel, fell 890,000 barrels to 126.8 million, the report showed. Analysts expected a decline of 1.5 million barrels.

Implied demand for petroleum products fell 1.3 percent to an average 21.9 million barrels a day. Distillate consumption slipped 4 percent to an average 4.5 million barrels a day.

Home-heating demand in the Northeast, where 80 percent of the nation's heating oil is used, will be 20 percent below normal through Jan. 5, said Weather Derivatives, a forecaster in Belton, Missouri. Home-heating use in the Midwest, where natural gas is the major heating fuel, will be 26 percent below normal over the next week, according to the forecaster.

Heating Oil

Heating oil for January delivery rose 2.04 cents, or 1.2 percent, to close at $1.7029 a gallon in New York. Heating oil reached a record $2.21 on Sept. 1. Futures have jumped 38 percent in 2005.

Natural gas for February delivery fell 41.4 cents, or 3.6 percent, to close at $11.223 per million British thermal units in New York. Futures touched $15.78 on Dec. 13, an all-time high. Prices are up 83 percent this year.

``Crude oil will have to fall eventually because supplies are adequate and demand is not the greatest for this time of year,'' said Michael Fitzpatrick, vice president of energy risk management at Fimat USA in New York. ``You can't justify crude oil at close to $60.''

Brent crude oil for February delivery rose 43 cents, or 0.8 percent, to $58.07 a barrel on the London-based ICE Futures exchange, formerly the International Petroleum Exchange. It was the highest close since Dec. 15.

http://www.bloomberg.com/apps/news?pid=10000103&sid=ab6SJEpOA56w