AP Worldstream: Oil prices drop below US$62 a barrel on surprise rise in U.S. gasoline stocks: “Shell Oil Co. warned Wednesday U.S. inventories of natural gas and heating oil may be under strain this winter, in the aftermath of hurricane damage to oil and gas facilities. Pipeline damage limited natural gas production and storage, while refineries have turned their focus to on-road fuels, rather than heating oil, Shell's president John Hofmeister said in Houston, Texas.”: Thursday 20 October 2005
GILLIAN WONG
Oct 20, 2005
Crude futures fell Thursday on news that U.S. gasoline stocks rose last week and as forecasts predicted Hurricane Wilma will likely avoid key U.S. oil facilities along the Gulf of Mexico coast.
Light, sweet crude for November delivery slipped 44 cents to US$61.97 a barrel on the New York Mercantile Exchange in Asian electronic trading. The contract, which expires Thursday, closed at US$62.41 on Wednesday, down 79 cents.
Gasoline fell half a cent to US$1.6705 a gallon (3.8 liters) while heating oil fell 1.18 U.S. cents to US$1.9016. Natural gas lost nearly a cent to US$13.540 per 1,000 cubic feet.
Wilma, which weakened slightly to a still-powerful Category 4 hurricane, was centered in the northwestern Caribbean Sea. The Miami-based National Hurricane Center warned it could re-intensify into a Category 5 storm Thursday, move into the Gulf of Mexico and then swerve east, toward Florida.
But some analysts said it was risky to assume the storm wouldn't disrupt the ongoing recovery of oil and gas operations in the Gulf, and recalled that some traders had discounted the impact of Hurricanes Katrina and Rita too early.
"We remain on storm watch," says Phil Flynn of Alaron Trading Corp. "The US$75-a-barrel area for crude oil is still the target. If Wilma takes a turn toward the oil infrastructure we could be there sooner rather than later."
As of Wednesday, about 65 percent of the Gulf's oil production and about 52 percent of its natural gas production remained blocked following the twin hurricanes that hit in August and September, according to the U.S. Minerals Management Service. The U.S. Gulf region provides 30 percent of oil and 21 percent of natural gas produced in the United States.
The weekly U.S. petroleum supply snapshot released Wednesday provided some relief to prices as it showed an unexpected increase in gasoline inventories.
For the week ended Oct. 14, U.S. gasoline inventories increased by 2.9 million barrels to 195.7 million barrels, according to the U.S. Department of Energy's Energy Information Administration.
Gasoline stocks remain 4 percent lower than a year ago, but the build came as a surprise to analysts, who underestimated the improvement in U.S. refining capacity _ which rose about 4 percent to 79.1 percent, according to EIA _ and the amount of gasoline imports.
U.S. crude inventories rose by 5.6 million barrels from the previous week to 312.0 million barrels. Crude stocks are nearly 12 percent higher than year-ago levels.
Analysts had been expecting crude inventories to rise by only about 1.5 million barrels, and gasoline and distillate inventories to fall, according to a Dow Jones survey of analysts.
U.S. inventories of distillates _ which include diesel and heating oil _ dropped by 1.9 million barrels to 122.7 million barrels. They are more than 1 percent above year-ago levels, but in the lower half of the average range for this time of year.
Shell Oil Co. warned Wednesday U.S. inventories of natural gas and heating oil may be under strain this winter, in the aftermath of hurricane damage to oil and gas facilities.
Pipeline damage limited natural gas production and storage, while refineries have turned their focus to on-road fuels, rather than heating oil, Shell's president John Hofmeister said in Houston, Texas.
"It's going to take months, not weeks, to repair those pipelines," he said, discussing the natural gas conduits incapacitated by the storms. "We've been humbled by these storms, but we're pulling through."
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