Oil Prices Up After Reports on Inventory Maine Dealers Struggling With Options for Customers

By FROM STAFF AND WIRE REPORTS

NEW YORK – Oil prices rose for the first time in four sessions Thursday as investors questioned whether supplies of crude, gasoline and heating oil are adequate to meet demand.

The Energy Department on Wednesday reported that crude inventories rose by 1.2 million barrels last week, while supplies of distillates including heating oil fell by 1.2 million barrels. Gasoline supplies fell by 100,000 barrels. Traders view that increase in crude supplies as inadequate, said James Cordier, president of Liberty Trading Group in Tampa, Fla.

“That’s nothing,” Cordier said. “We expect to see figures of 3 [million] and 5 [million] barrels.”

With heating season revving up, oil dealers in Maine are grappling with ripples from the market and with customers’ options for buying their oil.

Kelly Hughes, spokeswoman for Glenburn Fuel in Brewer, said her company decided not to offer a pre-buy program for oil this year, partly because of fluctuating oil prices. “Pre-buy” refers to a customer’s decision to either lock in a fixed rate for the coming season or to pay up front for a year’s worth of oil.

Most customers requested to pay upon delivery for oil, and about one in five have opted for a budget plan, which spreads winter oil costs over a year’s worth of payments, Hughes said.

“Compared to last year, we did not get the calls for pre-buy,” Hughes said, noting that many customers lost money with pre-buy programs last year. Another reason Glenburn Fuel decided not to offer pre-buy this year was that the wholesale prices were too high, Hughes said.

Dysart’s Inc. in Bangor allowed its customers to sign up for a pre-buy program for home heating oil until the end of September.

Tim Dysart, vice president, said Wednesday the company has seen fewer people pre-buy this year than in previous years. He said that was probably “because so many people got hurt last year,” when market prices dipped below the locked-in rates.

This year, Dysart’s pre-buy price was the same as its cash price of $2.65 per gallon, Dysart said.

Dead River Co. in Brewer offers its pre-buy program until the end of October but has seen more customers sign up for its “cap program,” whereby the customer pays the market price of oil, and Dead River sets a limit on how high the price can climb, according to Scott Gray, district manager at Dead River.

In order to make a pre-buy program profitable for a businesses, enough customers must sign up for it, Gray said. In order to offer the pre-buy price, companies buy contracts on the futures market. Contracts are for 42,000 gallons, he said.

“If you’ve only got commitments for 10,000 gallons, you’re not going to go out and buy a contract,” Gray said. When asked whether he expects prices to rise or fall this winter, Gray said he doesn’t know what to expect.

“I don’t know what the driving force in the market is anymore,” Gray said.

Crude’s uncertain direction early in the day reflected a battle between investors betting that demand will tighten and those who feel oil has peaked and begun a seasonal decline.

Oil prices also drew support from heating oil and gasoline futures. Nymex heating oil rose 5.26 cents to settle at $2.2313 a gallon, while November gasoline rose 5.63 cents to settle at $2.0522 a gallon. Prices of both were supported by the inventory declines and several minor refinery outages on the West Coast.

Some analysts said a smattering of weather systems strung from the Gulf of Mexico to the central Atlantic were supporting natural gas prices, though none of the storms are expected to develop quickly into subtropical or tropical storms and threaten critical gas and oil infrastructure in the Gulf.

In London, November Brent crude rose $1.78 to settle at $78.97 a barrel on the ICE Futures exchange.

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