Drop in supplies boosts oil prices

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Drop in supplies boosts oil prices Natural gas slips after supply data disappoints

By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:48 PM ET Oct 18, 2000 NewsWatch Latest headlines

NEW YORK (CBS.MW) -- Crude-oil futures closed higher Wednesday after two key reports on U.S. petroleum supplies revealed a drop in crude, distillate and gasoline inventories last week, compounding market worries over a possible shortage. Oil stocks fell.

10/18/2000 3:57:38 PM ET On the New York Mercantile Exchange, November crude closed up 49 cents to $33.48 a barrel. November heating oil gained 0.57 cent to 96.59 cents a gallon, and November gasoline futures climbed 2.13 cents to 94.21 cents a gallon.

The situation in the crude, gasoline and distillate markets "remains extremely tight," Thorsten Fischer, an economist at Economy.com in Eddystone, Pa., said in a weekly report. "The drop in crude oil (supplies) is extremely steep, against expectations of an equally steep build."

Distillate supplies, as of the week ended Oct. 13, dropped 540,000 barrels, the API reported late Tuesday. Heating oil, which is used to heat homes during the winter, is a component of distillates.

Early Wednesday, the Energy Department said supplies fell 900,000 barrels. Analysts had expected inventories to remain unchanged or increase by 1 million barrels, on average, according to a Bridge News survey.

Crude stocks fell 3.1 million barrel last week, the API said, contrary to expectations for a 1.5 million- to 2.5 million-barrel rise. The Energy Department's data revealed an even bigger 4.5 million-barrel decline.

The API's measure of gasoline inventories fell by 3.7 million barrels, compared to expectations for a drop of 1 million to 2 million barrels. The Energy Department said stocks fell 2.5 million barrels.

Refinery production rates fell to 92.7 percent from the prior week's 93.9 percent of capacity, the API reported.

'Sensitive' oil

Meanwhile, "the market is very sensitive to any potential disruption of the supply of oil," Fischer said.

Tensions in the Middle East continue to be a threat as renewed violence could erupt at any moment and threaten to interrupt the crude stream from that region, he said. See related story.

The market will watch developments in the Middle East closely, Fischer said, and "any bad news will translate into sharp upward movements in prices."

Meanwhile, the volatility in the equity markets may be grabbing some attention away from the energies, Jeff Mokychic, head analyst at BridgetonGlobal.com in Lehigh Valley, Pa.

Also "OPEC's seeming willingness to consider an output hike shows that oil is out there and provides some relief to inventory concerns," he added.

Heating-oil stocks remain tight

Fischer forecasts that the heating oil market will remain tight with this latest "substantial drawdown in inventories."

Prices will likely skyrocket with the first cold spell in the Northeast, the biggest consuming region for the energies in the U.S., he said.

"There is no cushion to fall back on when demand surges during the winter months," he added.

The API said distillate inventories actually rose about 9 million barrels, but called the rise a "less-than-average quarterly build reflecting both the surge in deliveries and the costs of holding additional inventory in a period of higher, fluctuating prices."

Crude-oil supplies fell about 8 million barrels in the third quarter, the API said. Even though the drop was less than half the average third-quarter drop in "recent past years," supplies ended the quarter at their lowest September level since 1976.

Oil stocks fall

Oil stocks were slightly lower Wednesday with the Oil Service Index (OSX: news, msgs) down 0.8 percent and the CBOE Oil Index (OIX: news, msgs) down 1.3 percent.

Within the indexes, shares of Varco International (VRC: news, msgs) fell 81 cents to $18 in recent trading and shares of Exxon Mobil (XOM: news, msgs) slipped $1.19 to $86.63.

Natural gas slips after supply data disappoints

November natural gas fell 21.1 cents to close at $5.228 per million British thermal units after the American Gas Association reported a rise in last week's natural gas supplies that was above some analysts' expectations.

The AGA reported a 29 billion cubic foot rise in inventories, but disappointed some expectations for a rise as little as 15 billion. The range of estimates topped out at 35 billion, however, according to a Bridge News survey.

A year ago, supplies rose 42 billion cubic feet.

http://cbs.marketwatch.com/archive/20001018/news/current/crude.htx?source=htx/http2_mw

-- Martin Thompson (mthom1927@aol.com), October 18, 2000


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