http://biz.yahoo.com/ap/071024/oil_prices.html?.v=20
Oil Prices Surge on Inventory Report Wednesday October 24, 3:42 pm ET By John Wilen, AP Business Writer Energy Futures Jump After the Government Reports Surprise Drop in Crude, Gasoline Supplies NEW YORK (AP) -- Oil futures surged Wednesday after the government's latest inventory report revealed large and unexpected declines in crude and gasoline inventories. Crude supplies fell last week by 5.3 million barrels, the Energy Department's Energy Information Administration said. Analysts surveyed by Dow Jones Newswires, on average, had been expecting supplies to increase by 300,000 barrels. "We haven't missed like this in a long time," said James Cordier, president of Liberty Treading Group in Tampa, Fla. Analysts said the decline was particularly surprising because refineries are shutting down for seasonal maintenance, processing less crude. Refinery activity fell during the week ended Oct. 19 by 0.2 percentage point to 87.1 percent of capacity. Analysts had expected an increase of 0.3 percentage point. "This time of year, we would look for a build in crude of that magnitude," or around 5 million barrels, said Brad Samples, a commodities analyst at Summit Energy Services Inc., in Louisville, Ky. Much of the decline in crude supplies was due to a sharp drop in imports, analysts said. Imports of crude oil fell last week by 1.3 million barrels a day to an average of 9.1 million barrels a day, the EIA said. Light, sweet crude for December delivery jumped $1.83 to settle at $87.10 a barrel on the New York Mercantile Exchange. November gasoline rose 3.86 cents to settle at $2.1475 a gallon on the Nymex, and heating oil for November jumped 4.22 cents to settle at $2.342 a gallon. Supplies of gasoline and heating oil also fell last week. Gasoline inventories dropped by 2 million barrels, countering analyst expectations for an increase of 1.1 million barrels. Gasoline imports fell last week by 255,000 barrels a day to an average of 838,000 barrels a day. Also supporting prices, demand for gasoline rose last week by 120,000 barrels, the EIA said. Supplies of distillates, which include heating oil and diesel, fell by 1.8 barrels last week. Analysts had expected distillate inventories to rise by 200,000 barrels. In other Nymex trading, November natural gas rose 21.1 cents on Wednesday to settle at $6.972 per 1,000 cubic feet. In London, December Brent crude jumped $1.52 to settle at $84.37 a barrel on the ICE Futures exchange. It may seem odd that imports of crude oil fell sharply in a week when oil prices reached records above $90 a barrel for the first time, but analysts explain that it takes several weeks for crude to reach the U.S. from overseas suppliers. Crude's record prices last week may well prompt a jump in imports, and thus supplies, in the weeks to come. "If not, we're going to have to price in some tight supplies," Cordier said. Energy Secretary Samuel Bodman on Wednesday renewed his call on OPEC to produce more oil, and several Organization of Petroleum Exporting Countries ministers appear willing to comply. Dow Jones Newswires reported that some OPEC officials may ask the oil cartel to agree to a production increase of 500,000 barrels a day at its November meeting. In September, OPEC said it would boost crude output by 500,000 barrels a day beginning Nov. 1. Analysts say there are signs some of that additional oil is already being produced ahead of schedule. Samples cautioned that the EIA import numbers are particularly volatile, and can be affected by the position of a few tankers. Where ships are and when they unload can cause wide swings in import data from week to week. "It gets pretty muddled," Samples said of import data. But the dramatic drop in crude inventories is sure to add to the debate between analysts and investors who believe oil supplies are tightening as winter heating season approaches, and those who feel supplies are plentiful. Oil prices have retreated each day since setting a new record of $90.07 on Thursday. "We were looking for this (report) to give us an indication of whether that easing was warranted," Samples said. At the pump, meanwhile, gas prices continued to creep higher. The national average price of a gallon of gas rose 0.2 cent overnight to $2.822, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, have risen 6.5 cents in a week and a half. Many analysts have predicted prices will have to rise even further if oil prices continue to rally.
