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Heating-Oil Futures Peak at $1 a Gallon
Dow Jones Business News
NEW YORK - Heating-oil futures reached their highest level since the Gulf War and pulled crude-oil futures higher Monday afternoon amid more concerns about low stocks ahead of winter.
At midsession at the New York Mercantile Exchange, September heating oil was up 2.86 cents, or 3%, at 99.80 cents a gallon. The contract peaked at one dollar a gallon, the highest level for a front-month heating-oil contract since October 1990, when heating-oil futures traded as high as $1.0780 a gallon.
October crude oil rallied 64 cents, or 2%, to $32.67 a barrel. November crude oil climbed 60 cents, or 1.9%, to $31.83 a barrel.
September gasoline rose 1.44 cents, or 1.5%, to trade at 96.85 cents a gallon.
"There is no notable news on the market other than the bullishness" over tight inventories, said Chris Schacte, an analyst at GSC Energy in Atlanta.
Crude-oil and heating-oil futures have rallied this month on reports of extremely low inventories.
The American Petroleum Institute, an industry group, last week reported that crude-oil stocks fell by nearly eight million barrels to a 24-year low. Stocks of distillates, which include heating oil and diesel fuel, fell by nearly three million barrels to just over 111 million barrels, 21% below last year's levels.
Distillate stocks normaly rise during the low-demand summer months, and because distillate stocks have failed to significantly increase this time of year, fears are growing of a heating-oil shortage during the winter months.
Analysts said that inventory reports need to show a build of at least three million barrels of distillate stocks to prevent an energy crisis this winter. The API will release its inventory data late Tuesday.
"All eyes are on the API," said John Kilduff, senior vice president at Fimat, U.S.A. Inc. "We're living and dying by that report."
Traders largely shrugged off weekend news reports that the Organization of Petroleum Exporting Countries will increase production quotas at its meeting next month. The Middle East Economic Survey and the Arabic newspaper al-Hayat reported that the cartel will boost its output quota by at least 500,000 barrels a day at its ministerial meeting Sept. 10.
Citing OPEC sources, al-Hayat said the production increase will be made through OPEC's price-band mechanism. The price-band mechanism calls for an output increase of 500,000 barrels a day if the price of OPEC's crude basket, a gauge of global oil prices, stays above $28 for 20 straight days. On Friday, the basket price rose to $30.44 a barrel, the tenth straight day it has stayed above $28.
But production constraints have many market players questioning whether OPEC really has the spare capacity to actually produce the extra crude. And analysts said the additional supply won't be enough to cool oil prices and may not reach the market in time to be refined for winter stocks.
Meanwhile, as prices surged further, OPEC president and Venezuelan Energy Minister Ali Rodriguez repeated that oil-consuming countries are responsible in part for high oil prices.
"It's not only a problem related to crude supply," Mr. Rodriguez said, adding that market speculation, refining bottlenecks and high oil taxes in some European countries are partly behind the high prices.
"Current prices do not correspond with reality," he said.
-- Cave Man (email@example.com), August 28, 2000
HEY CAVE SCOUT: HURRY.>..HURRY...HURRY....buy more. LOLOLOLOL: read between the lines, connect the dots etc:
"Current prices do not correspond with reality," he said. http://dowjones.work.com/index.asp? layout=story_ind_news&vertical=Energy&industry=Oil+% 26+Gas&doc_id=5386
-- cpr (firstname.lastname@example.org), August 28, 2000.
Monday's Commodities Roundup
Story Filed: Monday, August 28, 2000 6:04 PM EDT
Heating oil futures leaped to 10-year highs Monday upon heightened concern that low inventory levels could leave consumers literally out in the cold this winter.
Crude oil jumped higher for the same reason.
In other markets, soybeans soared and coffee fell sharply.
Heating oil temporarily climbed above $1 a gallon for the first time since the Gulf War.
There was no urgent development to explain heating oil's 3 percent rise on the New York Mercantile Exchange. But industry-watchers are becoming increasingly uneasy about low stockpiles in the Northeast, where most of the nation's heating oil is consumed.
Stockpiles are now just half what they were a year ago.
``We're in big trouble with this heating oil situation,'' said Bill O'Grady, energy analyst for A.G. Edwards and Sons in St. Louis. ``About the only thing that's going to bail us out is warmth -- if we get a warm winter, we'll be OK.
``A normal winter would be a problem.''
October heating oil settled up 2.97 cents at 99.25 cents a gallon.
Analysts cited two developments that may have helped support the price rise.
A refinery in Finland operated by Neste/Fortum experienced problems, with a 100,000-barrel-a-day catalytic cracking unit shut down due to a mechanical failure. The Porvoo plant is a major supplier of gasoline to the United States.
Also, operating difficulties continued at two Midwest facilities run by Marathon Ashland Petroleum -- a plant in Robinson, Ill., and a refinery in St. Paul, Minn.
But O'Grady called those two news items too minor to justify a big price swing.
``That's how bull markets work,'' he said. ``They sometimes move higher for no reason.''
Crude prices also moved nearly 3 percent higher. Investors remain preoccupied with OPEC's production intentions, and the cartel is now expected to only increase output by 500,000 barrels a day at its Sept. 10 meeting -- deemed insufficient to meet world market demands.
October crude rose 84 cents to $32.87 a barrel.
Among other energy products, September unleaded gasoline rose 2.36 cents to 97.77 cents a gallon and September natural gas rose 5.7 cents to $4.685 per 1,000 cubic feet.
-- Cave Man (email@example.com), August 28, 2000.
Charlie, you always overlook the important part.
"But production constraints have many market players questioning whether OPEC really has the spare capacity to actually produce the extra crude. And analysts said the additional supply won't be enough to cool oil prices and may not reach the market in time to be refined for winter stocks."
Spot oil prices for WTI Closed at $34.03.< /a> Looks like demand is picking up.
-- Cave Man (firstname.lastname@example.org), August 28, 2000.