Oil at record prices as supply report surprises

[peejay 327]

Oil at record prices as supply report surprises

By JOHN WILEN

Associated Press

NEW YORK— Oil prices set new records today and other energy futures also rose after the government reported a surprisingly large drop in crude oil inventories and accompanying declines in gasoline supplies and refinery activity.

The report from the Energy Department's Energy Information Administration confirms the view of many investors that oil supplies are tightening even as demand remains strong. That's why oil prices are rising despite OPEC's decision on Tuesday to boost crude production by 500,000 barrels per day this fall, analysts said.

Despite setting a new price record of $79.89 Wednesday, oil is still well below inflation-adjusted highs above $101 a barrel hit in early 1980.

Oil's advance has been largely due to speculative buying by big investment funds, who are responding to a price structure in which oil contracts for delivery in future months are cheaper than the current front-month contract, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

That kind of structure, known in market-speak as "backwardation," signifies tight demand in the immediate future, and is a buying incentive. Investors who buy now will end up with more oil contracts later, when October futures roll over to cheaper contracts for delivery in later months, Ritterbusch said.

"This is a market that wants to run up on the slightest bit of information," Ritterbusch said.

Prices were also being supported by worries a tropical depression that formed in the western Atlantic on Wednesday will become a hurricane and hit critical Gulf oil and gas infrastructure.

"The National Hurricane Center says there's a good chance that could get into the Gulf," Ritterbusch said.

Light, sweet crude for October delivery rose $1.35 to $79.58 on the New York Mercantile Exchange after setting a new trading high of $79.89 earlier. October gasoline rose 2.86 cents to $2.0097 a gallon.

Heating oil futures rose 2.58 cents to $2.2085 a gallon on the Nymex, while natural gas futures gained 28.3 cents to $6.217 per 1,000 cubic feet.

In London, October Brent crude gained 58 cents to $76.96 a barrel on the ICE Futures Exchange.

At the pump, meanwhile, the average national price of a gallon of gas inched higher by 0.1 cent overnight to $2.815, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May.

In its weekly report on petroleum inventories, the EIA said crude oil supplies fell by 7.1 million barrels in the week ended Sept. 7, more than twice the 2.7 million-barrel decline analysts surveyed by Dow Jones Newswires, on average, had expected.

Gasoline inventories fell by 700,000 barrels, slightly more than the expected 500,000 barrel decline.

Refinery utilization fell by 1.6 percentage points to 90.5 percent of capacity. Analysts had expected a 0.1 percentage point decline. And inventories of distillates, which include heating oil and diesel fuel, grew by 1.8 million barrels, more than the 1.4 million-barrel increase analysts had expected.

Crude imports fell by 674,000 barrels a day on average last week to 9.56 million barrels, while gasoline imports fell an average of 298,000 barrels a day to 1.02 million barrels a day.

Demand for gasoline averaged about 9.6 million barrels a day over the last four weeks, about 0.9 percent above last year, EIA said.

Oil's runup has perplexed some analysts, who expect demand for oil and petroleum products to cool this fall.

"We're at records, but it doesn't appear to be sustainable," said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.

Indeed, the Paris-based International Energy Agency on Wednesday lowered oil demand forecasts for this year and next.

http://www.chron.com/disp/story.mpl/front/5129126.html

[mawilson 2,133]

Thank God.

[Jasman0717 9]

Gas around here has gone up 15 cents a gallon in the past week

[almaty 19]

$4.00 soon

[mawilson 2,133]

$4.00 soon

Yay!

[Dakine 26]

$389.99 [regular] here already.

[mawilson 2,133]

$389.99 [regular] here already.

Wow, that's pretty expensive.

Almost 400 dollars for a gallon.

[one...two...tree 2,762]

Thank God.

It will accelerate a recession.

[mawilson 2,133]

Thank God.

It will accelerate a recession.

It will also accelerate the advancement of alternative forms of energy.

[one...two...tree 2,762]

Thank God.

It will accelerate a recession.

It will also accelerate the advancement of alternative forms of energy.

That's what I don't like about the market...it knows not what it does.

[AnaAndDaniel 0]

maybe they will let me telecommute!

Daniel

:energetic:

[Dan J 277]

Thank God.

It will accelerate a recession.

It will also accelerate the advancement of alternative forms of energy.

That's what I don't like about the market...it knows not what it does.

New technology is only going to be developed only when the cost makes sense over alternatives. For that to happen with fuel, oil needs to get really expensive. But it will take time to develop, so we will be paying for high fuel costs before alternatives proliferate the market. Which may make the alternative for most people, to find ways were they can travel cheaply, or change their lives so they don't have to travel as much. Which wouldn't necessarily a bad thing, as cities will likely build themselves in a way where travel is not as necessary.