04/27 11:43 Gasoline Futures Rise to Record as Summer Supplies Seen Tight By Bradley Keoun

New York, April 27 (Bloomberg) -- Gasoline futures rose to a record, surpassing Persian Gulf War highs, on expectations that U.S. supplies will stay below year-ago levels as demand picks up with the warm-weather driving season.

Production of cleaner-burning reformulated gasoline, used in the nation's biggest cities, ran 3.3 percent behind year-earlier levels over the past month, industry figures show. Pump prices in cities that use the fuel, including Chicago and San Francisco, have climbed above $2 a gallon and may rise more, analysts said.

``We have a looming problem in front of us with reformulated gasoline, and it is a problem that will not be fixed right away,'' said Peter Beutel, president of Cameron Hanover Inc., an oil consulting firm in New Canaan, Connecticut.

Gasoline for May delivery rose as much as 1.08 cents, or 1 percent, to $1.115 a gallon on the New York Mercantile Exchange. The previous record for the futures, which have been trading for 17 years, was $1.11 set in August 1990, after Iraq invaded Kuwait. Prices are up 5 percent this week and 21 percent this month.

Crude oil for June delivery was recently 2 cents higher at $28.46 a barrel on the Nymex. Prices are up 12 percent from this time last year.

``It's astounding'' that prices could pass their Gulf War level, said John Fry, an analyst with Barclays Capital in London. ``There was a war on then and crude was above $40.''

U.S. inventories of reformulated gasoline fell 3.4 percent last week to 38.16 million barrels, the American Petroleum Institute said Tuesday, leaving them 8 percent below levels a year earlier.

`Patchwork' of Standards

Senator Frank Murkowski of Alaska, chairman of the Senate Committee on Energy & Natural Resources, issued a statement yesterday decrying a patchwork of fuel standards across the U.S. that makes it difficult for refiners to meet local needs. Nationwide, refiners must supply about 50 varieties of gasoline, including summer and winter grades, according to industry sources.

``Refineries around the country, already unable to keep up with demand for product, must supply seasonal products for specific markets,'' Murkowski said.

A new refinery hasn't been built in the U.S. since 1976 because of low profits through much of the 1990s and strict environmental regulations for new plants, according to the Washington-based API, an industry group.

The U.S. rally pushed European prices higher, with a benchmark barge of gasoline this week rising to as much as $342 a ton for immediate delivery, from $333 a ton last week. European refiners are shipping fuel across the Atlantic to capture a 25 cent-a-gallon premium for gasoline, more than double the average during the past year.

Imports Expected

The U.S. is ``expecting a large influx of imports in the next few weeks,'' said Mark Keenan, a broker with Prudential Bache International in London. ``So the situation shouldn't last much longer.''

In London, Brent crude oil for June settlement was 20 cents higher at $27.80 a barrel on the International Petroleum Exchange.

Crude oil was bolstered after Rilwanu Lukman, Nigeria's envoy to the Organization of Petroleum Exporting Countries, said he saw no reason for OPEC to ``rock the boat'' at its June meeting. The remark raised concern that the 11-nation group will not lift production to lower prices, analysts said.

``The latest blow is that OPEC isn't looking to increase quotas,'' said Tim Noest, a broker with ADM International in London. ``Effectively, that has removed the ceiling on prices as we approach the driving season.''

-- Guy Daley (guydaley@altavista.com), April 27, 2001