AP
Oil Prices Slip as Refinery Worries Ease
Wednesday July 4, 6:38 am ET
By George Jahn, Associated Press Writer
Oil Prices Slip Amid Expectations That U.S. Refineries Will Boost Gasoline Output
VIENNA, Austria (AP) -- Oil prices retreated in quiet trading Wednesday amid expectations that U.S. refineries will boost gasoline output, reversing a trend that drove the market to a new 10-month high in the previous session.
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The most recent rally, which has boosted prices above $71 for the first time in 10 months, was driven largely by a report from the U.S. Energy Department's Energy Information Administration last Wednesday showing that gasoline inventories fell when analysts had expected an increase.
But in this week's inventory report, which will be delayed until Thursday due to the Independence Day holiday in the United States, analysts surveyed by Dow Jones Newswires expect gasoline inventories on average to increase by 700,000 barrels.
Refinery utilization is expected to rise by 1.1 percentage points to 90.5 percent, building on last week's gain. That increase is expected to tap into crude inventories, which are at 9-year highs. Analysts, on average, expect crude inventories to fall by 500,000 barrels.
Vienna's PVM Oil Associates also suggested some easing of the tight gasoline supply situation, "following a number of restarts." It said expected refinery runs of above 90 percent would represent "the first time in five weeks," that percentage was reached.
Distillate inventories, which include heating oil and diesel fuel, are expected to decline by 200,000 barrels.
Light, sweet crude for August delivery dropped 35 cents to $71.06 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. The contract had risen 32 cents to settle at $71.41 a barrel Tuesday, a day before the July 4 holiday in the U.S.
August Brent crude fell 39 cents, fetching $72.59 a barrel on the ICE Futures exchange in London.
"We're seeing some profit-taking," said Victor Shum, energy analyst with Purvin & Gertz in Singapore.
"The mood in the market has been bullish, driven by the gasoline market in the U.S.," he added. "For crude to retreat, the market will need to see signals of demand going down. The reality is that consumers are willing to pay high prices."
The closure of a 108,000 barrel-per-day refinery in Coffeyville, Kansas, due to flooding over the weekend supported prices on Tuesday. The Coffeyville Resources facility is capable of producing 2.1 million gallons of gasoline a day.
The loss of the refinery, which remains largely under water, means retailers in Kansas and other surrounding states are having a harder time supplying their pumps with gasoline.
Nymex heating oil futures were down nearly a cent at $2.0574 a gallon while natural gas prices fell almost 2 pennies to $6.738 per 1,000 cubic feet.
Associated Press writer Gillian Wong in Singapore contributed to this report.
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