GO
Loading...

Oil Finishes Just Shy of $69 as Gasoline Inventories Decline

Crude oil and gasoline prices settled higher on Wednesday after a government inventory report stoked concerns about the nation's gasoline supplies during the summer driving season.

Heating oil also gained ground in trading after a decline in distillate stocks surprised traders.

"Everyone was expecting another flood of gasoline like last week and that didn't happen. The other surprise was distillate fuel. It set the tone for the market today, and that's why we're higher," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude for August delivery climbed $1.20 to end at $68.97 on the New York Mercantile Exchange. The contract rose as high as $69.21 during the session.

Gasoline futures rose 0.77 cent to end at $2.2546 a barrel. Retail gasoline prices clocked in at $2.975 a gallon Wednesday, a dime lower than a year ago and less than $3.209 a gallon a month ago.

The Energy Department reported Wednesday that gasoline inventories dropped by 700,000 barrels in the week ended June 22, contrary to the 1.1 million gain that had been expected by analysts polled by Dow Jones Newswires

However, crude oil supplies rose by 1.6 million barrels to 350.9 million barrels last week, above the average estimate of a 1 million barrel increase.

Refinery utilization rebounded 1.8 percentage points to 89.4%, higher than estimates of a gain of 0.8 percentage points.

The weekly petroleum supply snapshot has been watched closely during a spring and early summer in which an unusually high number of refinery outages have led to high oil and gasoline futures prices and record U.S. gasoline prices at the pump.

"Frankly between last week's report and this week's report, it demonstrates why the real issue is product inventory levels and not the refinery operating rate," said Citigroup Global Markets analyst Tim Evans. "Because a week ago, we had lower operating rate and had builds in products ... today we have a higher rate, but draws in inventories."

Flynn also noted that gasoline imports, which had propped up supplies the previous week, dropped by 300,000 barrels last week. Current levels of gasoline supplies are well below the lower end of average for this time of year.

However, crude oil inventories are near full capacity, Evans said, as refinery disruptions have backed up stocks for the past several months. Still, oil prices have been riding higher on the shortage of gasoline inventories.

"We're doing our darnedest to ignore how much crude oil we have. It's at the highest level since May 1998," Evans said.

The report also said that distillate stocks, which include heating oil and diesel fuel, decreased by 2.3 million barrels and remain in the middle of average for this time of year. Analysts expected an increase of 200,000 barrels.

On the Nymex, July heating oil futures finished at $2.0246 a gallon, up 3.13 cents.

The market was little affected by news Tuesday that ConocoPhillips and Exxon Mobil refused a Venezuelan government offer to keep pumping oil in the country under less profitable terms, analysts said.

The two companies refused to work as junior partners to Venezuela's state-owned oil company. Analysts said their departure from one of the world's largest oil deposits would not cause oil shortages or higher U.S. pump prices since production will likely shift to other companies.

Four major oil companies -- U.S.-based Chevron, BP, France's Total and Norway's Statoil -- accepted new minority stakes at a signing ceremony Tuesday.

Vienna's PVM Oil Associates also cited comments by OPEC President Mohammed al-Hamli as saying the organization is unlikely to raise production before September. Still, PVM said production from the 10 members of the Organization of Petroleum Exporting Countries under quotas "increased slightly in June to around 26.8 million barrels a day" -- up by a daily 100,000 barrels compared to May.

In other trading, natural gas for July delivery gained 5.2 cents to settle at $6.929 per 1,000 cubic feet.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video