Tue, 26 Sep 2000, 9:54pm EDT

Oil Rises as U.S. Heating Oil Supplies Lower Than Expected

By Stephen Wisenthal

Singapore, Sept. 27 (Bloomberg) -- Oil prices rose after the latest U.S. inventory figures fell short of expectations, increasing concern refineries won't make enough heating oil for the northern hemisphere winter beginning in a month.

Heating oil stocks rose 0.7 percent, though the shortfall compared with year-ago levels widened to 36 percent from 35 percent, the American Petroleum Institute said. In the northeast, the main area for heating oil demand, inventories are currently 23.9 million barrels, less than the 35.5 million barrels drawn down between mid-October and late April last winter.

``Inventories for heating oil are not going to be at a level that provides a lot of comfort,'' said Kyle Cooper, an analyst with Salomon Smith Barney in Houston. ``Refineries are running at a very high level of utilization. The market is extremely skittish.''

Crude oil for November delivery rose as much as 30 cents, or 1 percent, to $31.80 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Earlier, in floor trading, it fell 7 cents. Prices are down 16 percent from a 10-year high of $37.80 last Wednesday.

The API figures, released after floor trading ended, showed U.S. distillate fuel inventories, which include heating oil and diesel, fell 761,000 barrels, or 0.7 percent, to 116.20 million barrels. Heating oil supplies rose and diesel fell. Analysts surveyed before the report had expected an overall increase in distillates of between 1.1 million and 1.5 million barrels.

The decline left distillate supplies 21 percent lower than a year earlier, with only weeks to go before the start of the winter heating season, when demand peaks. That was wider than the 19 percent year-on-year deficit a week earlier. Heating Oil Falls

Heating oil for October delivery rose as much as 1.01 cents, or 1.1 percent, to 94.00 cents a gallon in after-hours Nymex trading. During floor trading, it fell for a sixth session, declining 1.08 cents, or 1.2 percent. Prices are down from a 10- year high of $1.076 on Sept. 12, when concern about short supplies this winter intensified.

``The product problem will continue until the spread between crude and product prices widens further,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. ``Obviously U.S. refiners can't make more, but it might lure Russian, European and even Asian refiners to send product here.''

U.S. refineries are running at 94.4 percent of normal capacity, the API said. They have been running at close to full capacity for most of the year.

Prices of heating oil and other products in the U.S., the world's largest consumer and importer of oil, influence crude oil prices around the world.

Oil prices have fallen in recent days after U.S. President Bill Clinton said the government would offer 30 million barrels from its Strategic Petroleum Reserve to boost low inventories. U.S. crude oil supplies fell to a 24-year low in August.

The U.S. decision to release reserves may lessen the chance the Organization of Petroleum Exporting Countries will raise output further, after it agreed this month to its third quota increase of the year, analysts said.

European Union finance ministers will discuss a similar release from their reserves when they meet Friday.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=AOdE6KxQhT2lsIFJp

-- Carl Jenkins (Somewherepress@aol.com), September 26, 2000

Answers

What would we do without those API Tuesday evening inventory reports? They are invaluable.

-- QMan (qman@c-zone.net), September 26, 2000.

Are these figures released on Tuesday, every week?

-- Nancy7 (nancy7@hotmail.com), September 26, 2000.

Yes, the API figures, covering the past week are released every Tuesday....almost equally interesting are the natural gas inventory figures, released by the American Gas Association every Wednesday.

-- R2D2 (r2d2@earthend.net), September 26, 2000.

When you analyze these figures, this is a real kick in the head -- from an analysts' anticipation of a 1.1 million to 1.5 million barrel gain to a 760,000 barrel drop. The trend line seems clear -- and, it's very ungood.

-- RogerT (rogerT@c-zone.net), September 27, 2000.

The term "ungood" reminds me of Newspeak from George Orwell's _1984_.

War is Peace. Ignorance is strength. Freedom is slavery. The worldwide petroleum deficit is a surplus.

(Indeed, why are we all concerned? The wise and good people in Washington DeeCee are taking care of things. See, they released oil from the rainy day fund. Go back to sleep!)

-- Andre Weltman (aweltman@state.pa.us), September 28, 2000.