Gasoline Supplies are Tightening

Crude oil rose in New York on concern refinery outages and rising U.S. gasoline demand may make it harder to build supplies for the peak summer period.

A U.S. Energy Department report today will probably show motor fuel stockpiles fell for a sixth week as breakdowns and fires delayed refiners' preparations for summer production. Demand in the four weeks ended March 9 was 2.8 percent higher than a year earlier, the department said last week. Gasoline futures have gained 26 percent this year.

``We're certainly bullish on oil long-term,'' said Rowan Menzies, market analyst at Commodity Warrants Australia Ltd. in Sydney. ``Gasoline certainly has been quite encouraging for that long-term outlook'' and peak demand is still to come, he said.

Crude oil for May delivery rose as much as 49 cents, or 0.8 percent, to $59.74 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $59.50 at 2:43 p.m. in Singapore.

The contract fell 45 cents, or 0.8 percent, to $59.25 yesterday. The less-active April contract, which expired yesterday, closed 14 cents higher at $56.73 a barrel.

U.S. oil stockpiles probably gained 1 million barrels last week, based on the median estimate in a Bloomberg News survey of 15 analysts. They held 325.3 million barrels on March 9, or 5.7 percent more than the five-year average for the week.

Gasoline inventories probably declined 2 million barrels last week. Supplies fell 6.3 million barrels the past two weeks to 213.9 million barrels on March 9, matching the five-year average.

Demand Focus

``The big focus is going to be on demand,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. ``You're going to see the refineries coming back on line'' this month but demand is going to be rising the same time, he said.

Oil fell this month as mild weather in the U.S. Northeast clashed heating demand and saw total product consumption fell 4.7 percent from a 14-month high in the department's past three reports. Declines on world equity markets also reduced investor confidence.

Even were equity markets to fall further, the scope for that to slow the U.S. economy and depress oil prices is limited, according to Commodity Warrants.

``The cars are still there and people are still going to need them to drive to work,'' said Menzies, who is advising clients to buy July and August oil contracts.

In London, Brent crude oil for May settlement climbed as much as 26 cents, or 0.4 percent, to $60.46 a barrel in electronic trading on the ICE Futures exchange. It traded at $60.43 at 2:52 p.m. Singapore time.

Gasoline

U.S. gasoline demand peaks during the summer vacations between memorial Day late May and Labor Day early September. The North Atlantic hurricane season, which frequently disrupts oil imports and refining activity around the Gulf of Mexico, runs from June 1 through November 30.

Gasoline for April delivery was at $1.9585 a gallon after falling 0.8 percent to $1.9421 yesterday. It reached $1.9585 a gallon yesterday, the highest intraday price since Aug. 22.

A spate of refinery breakdowns may be slowing efforts to prepare for summer fuel production.

Valero Energy Corp., the largest U.S. oil processor, said yesterday a power failure at its refinery in Corpus Christi, Texas, led to emergency flaring.

U.S. refineries probably used 86.1 percent of their plant capacity last week, up from 85.6 percent a week earlier, based on the analyst survey. Utilization averaged 86 percent last March before rising to 89 percent in April.

``We've seen stocks falling quite sharply but with a lot of maintenance in refineries currently underway I don't think it's particularly alarming,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``We're caught in a bit of range trading between $55 and $60'' until gasoline demand really picks up, he said.

source:www.bloomberg.com