Crude oil was little changed in New York after rising to a 10-month high yesterday on speculation U.S. refiners may strain to restore summer gasoline supplies.
A July 5 Energy Department report will probably show U.S. oil stockpiles were unchanged last week after a month of gains, as refiners increased operating rates to make more gasoline, according to a Bloomberg News survey of nine analysts. Refinery rates may reach 90 percent for the first time in five weeks.
``It doesn't look like they're going to be able to get their rates back up to anywhere near normal'' before the end of summer, said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``Investors just aren't willing to let any of the premium come out of the market yet.''
Crude oil for August delivery was at $71.15 a barrel, up 6 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8:19 a.m. in Singapore.
The contract rose 41 cents, or 0.6 percent, to $71.09 a barrel yesterday, the highest close since Aug. 25. It earlier fell as much as 1.6 percent.
``Support around $70 is holding,'' Altavest's Hartmann said. ``I thought we were going to come into the week with a little bit of profit-taking.''
Stockpiles in the U.S., the world's biggest oil user, rose to 350.9 million barrels on June 22, a nine-year high and 11 percent more than the five-year average for the period, the department said last week.
Second-Half Risks
``The market seems to be looking toward the third and fourth quarter when inventories will tighten,'' Tom Bentz, a trader at BNP Paribas in New York, said yesterday. ``The market is still in this uptrend and it finds it much easier to move higher than lower.''
World oil demand peaks in the fourth quarter when refiners make heating fuel for the northern hemisphere winter. Demand then will rise to 88 million barrels a day, from an estimated 84.6 million in the second quarter, the International Energy Agency said June 12.
Still, the premium investors are paying for December supply over the August contract narrowed to a nine-month low last week. It was at $1.08 from a low of 70 cents on June 28 and a high of $3.03 on May 24.
That narrowing spread may be a sign investors are placing greater weight on the risk of hurricanes and higher summer gasoline prices, Altavest's Hartmann said.
``They're definitely pricing all the risk now,'' he said. ``It would only take one-well placed hurricane'' to get oil to $80, he said.
Storms, Gasoline
U.S. gasoline demand usually peaks June through August as summer holiday travel puts more cars on the roads. The North Atlantic hurricane season, which can disrupt oil production, shipments and processing along the Gulf of Mexico coast, runs June through November.
Only one tropical storm formed last month, compared with an average 79 for June according to Hurricane Center data since 1851.
Gasoline for August delivery was at $2.2476 a gallon after rising 0.3 percent to $2.2487 yesterday.
Below-average U.S. gasoline stocks probably gained 500,000 barrels last week, based on the median estimate from the survey. Supplies held 202.6 million barrels a week earlier, 4.4 percent below the five-year average.
Refiners used 89.4 percent of their plant capacity in the week ended June 22, the first increase in five weeks and a 2.1 percentage point gain. Operating rates probably reached 90.3 percent last week, according to the survey.
``We feel the crude oil market's trading at the top end of its range right now,'' James Cordier, president of Liberty Trading Group in Tampa, Florida, said yesterday. ``We're expecting the market to tail off this week with larger utilization numbers.''
Brent crude for August settlement rose $1.22, or 1.7 percent, to $72.63 a barrel on the London-based ICE Futures exchange. It was the highest close since Aug. 25.
source:bloomberg.com
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