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U.S. crude prices back to $30/barrel, gasoline soars May 18, 2001

By Richard Valdmanis

NEW YORK (Reuters) - U.S. crude oil prices headed back to $30 a barrel Friday trailing red hot gasoline as supply concerns flared up again ahead of summer driving season.

The surge, which brings crude oil to its highest price in three months and gasoline back within reach of its record, has gloomy implications for the sluggish U.S. economy and sharpens a focus on the Bush Administration's new energy policy unveiled Thursday.

It also spells trouble for the nation's motorists, already paying all-time high prices at the pump of more than $1.70 per gallon for regular unleaded, according to the American Automobile Association's daily survey.

Crude oil futures on the benchmark New York Mercantile Exchange (NYMEX) jumped 3.5 percent, or $1.00 to $29.91 a barrel -- the highest front-month contract since February. Gasoline futures, meanwhile, soared more than 5 percent, or 4.78 cents, to $1.0639 a gallon.

Oil dealers attributed the gains to short-term worries over gasoline supplies ahead of peak demand driving season, which traditionally kicks off at the end of May when families hit the roads for vacation.

Supplies are slightly above last year's razor-thin levels, but demand is also expected to be higher. Travel industry surveys released Thursday showed that more Americans plan to drive to vacation destinations this year than last.

The tight-wire balance was not expected to end any time soon, despite the new White House energy plan which calls for increasing domestic petroleum supplies and granting tax incentives for conservation measures.

Some traders had expected the Bush Administration to enact shorter-term measures to help ease immediate troubles like tight gasoline supplies and electricity shortages in California.

MIDEAST TENSIONS ADD CONCERN

Meanwhile, tensions grew in the Middle East, a region of heavy oil production, with U.S. and British planes reportedly bombing areas in southern Iraq after provocation, and Israeli planes attacking targets on the West Bank after a suicide bombing.

Tensions in the region sometimes spur buying in petroleum markets by fueling fears of supply disruptions.

Oil dealers also remained on edge due to indications that OPEC, the producers cartel, will not ease its production limits at its meeting in June -- causing worries of inventory drawdowns in the U.S. during a season of generally high refinery activity.

The cartel has already cut output by a total of 2.5 million barrels per day this year to keep prices in a desired range.

^ REUTERS@

http://www.individual.com/story.shtml?story=d0518162.300

-- Martin Thompson (mthom1927@aol.com), May 19, 2001