Crude Oil Rises on Concern for Shortages of U.S. Heating Oil

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10/06 11:52

Crude Oil Rises on Concern for Shortages of U.S. Heating Oil

By Mark Shenk

New York, Oct. 6 (Bloomberg) -- Crude oil rose for the first time in four days on concern that U.S. refiners are having trouble refilling storage tanks with heating fuel before cold weather boosts demand.

Higher crude oil prices and normal winter weather will probably boost homeowners' heating oil bills by 25 percent this season, the U.S. Energy Department said today. Fuel distributors and homeowners in the Northeast, the fuel's biggest market, may already be stocking up, analysts said.

``If we have a colder-than-normal winter, supplies will be severely stressed,'' said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. ``There is evidence that people are hoarding in the Northeast.''

Crude oil for November delivery rose as much as 44 cents, or 1.4 percent, to $30.97 a barrel on the New York Mercantile Exchange. Prices, while still more than double what they were a year ago, are down 18 percent from a 10-year high of $37.80 last month. Oil has traded between $30 and $32 the past two weeks.

Retail heating oil will average about $1.37 a gallon, up 16 percent from last year's $1.18, the DOE's Energy Information Agency said in an annual report on winter fuels. Oil prices paid by refineries were expected to average $27.62 a barrel, up from the $25.11 average last winter.

The government forecasters expect demand for heating fuels to be up about 12 percent from last season, the warmest winter on record.

``All they are doing is confirming what we already know,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. ``People are already paying higher prices for fuel.''

Heating oil for November delivery rose as much as 1.28 cents, or 1.4 percent, to 94 cents a gallon on the Nymex.

Gasoline for November delivery rose as much as 1.45 cents, or 1.7 percent, to 84.95 cents a gallon.

East Coast Supplies

Heating oil supplies along the East Coast are about half their year-ago levels, even with U.S. production well above the pre-winter period in 1999.

In London, Brent crude oil for November settlement rose as much as 33 cents, or 1.1 percent, to $30.22 a barrel on the International Petroleum Exchange.

U.S. demand last week for distillate fuels, which include heating oil and diesel, was 4.06 million barrels a day, the industry-funded American Petroleum Institute said in a weekly report Tuesday. That's 16 percent higher than the 3.49 million- barrel average for the corresponding period last year.

``From now on, we will be going from API report to API report and moving on those numbers,'' said Tom Blakeslee, an oil and gas trader at Energy Merchant LLC in Wilton, Connecticut. ``We will keep an eye on the weather. It will be more important from now on.''

Cold Weather

Temperatures could dip below freezing in northern parts of the U.S., east of the Rocky Mountains, as unseasonably cold air moves in from Canada during the next few days, the National Weather Service said.

Within the distillate fuel category, heating oil supplies rose 300,000 barrels, or 0.6 percent, to 47.73 million barrels, narrowing the year-on-year deficit by one percentage point to 35 percent, the API said in its report.

Concern about a possible shortage of heating fuel this winter prompted U.S. President Bill Clinton to release 30 million barrels of crude oil from the nation's 571 million-barrel strategic reserves.

U.S. Energy Secretary Bill Richardson yesterday expressed concern that U.S. heating oil was being exported to Europe. ``It is a priority for heating oil to go into this country,'' he said.

Clinton administration officials have been urging European leaders to replenish their heating oil inventories, though the U.S. is not asking the Europeans to release oil from their government reserves, Richardson said.

The U.S. has seen ``positive effects'' of the decision to release oil from its emergency reserves, Richardson said. Prices have come down from their 10-year high last month, inventories are rising and refined oil products are arriving in the Northeast, where they are needed, he said.

High prices and potential shortages have also prompted members of the Organization of Petroleum Exporting Countries to raise output three times this year, relaxing the group's yearlong supply constraints. OPEC pumps about 40 percent of the world's oil.

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-- Carl Jenkins (Somewherepress@aol.com), October 06, 2000


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