API Crude Oil Supply Falls 0.7%

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Tue, 19 Sep 2000, 11:05pm EDT

09/19 18:27 API Crude Oil Supply Falls 0.7%: Economic Insight (Update1) By Mark Shenk

New York, Sept. 19 (Bloomberg) -- The following is a summary of -- and reaction to -- the American Petroleum Institute's weekly report on U.S. oil inventories and production. The report covers the week ended Sept. 15.

Market Reaction

Limited. U.S. crude oil supplies fell a greater-than-expected 2.04 million barrels, or 0.7 percent, to 286.58 million barrels. Analysts surveyed before the report expected that inventories were 200,000 barrels lower to 500,000 higher.

The decline left supplies 7.2 percent lower than a year earlier, wider than the 6.7 percent year-on-year deficit a weak earlier.

U.S. distillate fuel inventories, which include heating oil and diesel, rose 1.25 million barrels, or 1.1 percent, to 116.26 million barrels. That was in line with analyst expectations for an increase of between 1 million and 1.5 million barrels.

Crude oil for October delivery rose 45 cents to $36.96 a barrel in electronic trading on the New York Mercantile Exchange after the report, close to yesterday's 10-year high of $37.15. October heating oil was up 0.89 cent at $1.028 a gallon.

Behind The Numbers

For distillates, the gain left supplies 19 percent lower than a year ago, slightly narrower than the 20 percent deficit a week earlier.

Within the distillate fuel category, heating oil supplies rose 631,000 barrels, or 1.4 percent, to 47.1 million barrels, 35 percent lower than a year earlier, compared with the 37 percent deficit a week earlier.

Larger increases are needed to provide adequate supplies of heating oil for the winter and avoid shortages that sent home heating oil prices above $2 a gallon in the U.S. Northeast last winter, analysts said.

U.S. gasoline inventories fell 21,000 barrels last week to 193.14 million barrels. The decline included a revision of the previous week's figure, which was lowered by 2.77 million barrels. Analysts expected a gain of between 300,000 and 900,000 barrels.

What Experts Say

The report was ``very bullish,'' said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago.

``We keep expecting these numbers to jump up big but they keep disappointing,'' Flynn said, referring to inventories of both crude oil and heating oil. Increased output from the Organization of Petroleum Exporting Countries ``is not showing up.''

``It's not enough oil to build for winter and the capacity to refine oil is still very tight,'' he said. ``Nothing about these numbers can make people feel comfortable running into the winter period.''

Market Trend

Crude oil prices have soared in recent days on concern that tensions between Iraq and Kuwait could lead to the disruption of output from the Persian Gulf, source of about a third of the world's oil. An uninterrupted supply of oil is needed from OPEC and other producers to replenish U.S. inventories

Heating oil prices reached a 10-year high of $1.076 a gallon last Tuesday on concern that U.S. inventories were growing too slowly to ensure adequate supply for the winter. Heating oil futures, which represent wholesale prices, have been at or close to 10-year highs since late August.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Oil%20News&touch=1&T=energy_news_story.ht&s=AOcfoQRNMQVBJIENy

-- Martin Thompson (mthom1927@aol.com), September 19, 2000

Answers

Now here's a story. This should not be happening, what with two big production increases over the past four months.

-- Wellesley (wellesley@freeport.net), September 20, 2000.

Are oil tankers getting lost on the high seas, or what?

-- QMan (qman@c-zone.net), September 20, 2000.

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