Oil Prices Rise Ahead of U.S. Stocks Data
By EDITH BALAZS
BUDAPEST, Hungary – Crude oil prices rose Wednesday ahead of a U.S. petroleum inventory report that is expected to show a dip in crude, gasoline and distillate stocks because of production shutdowns from Hurricanes Katrina and Rita.
Crude contracts, hovering around $65 a barrel, are expected to remain strong on the back of heavy winter demand and a slow-paced recovery of U.S. refineries. With products such as heating oil and gasoline likely gaining in the coming months, analysts do not expect upward pressure on crude to ease.
"I believe crude prices will remain in the $60 a barrel range for the remainder of the year and if we don’t see a significant slowdown in demand next year, I anticipate they will continue to be strong," said Julian Lee, energy analyst at the London-based Center for Global Energy Studies.
Light, sweet crude for November delivery rose 16 cents to $65.23 a barrel on the New York Mercantile Exchange. Heating oil edged up to $2.0695 a gallon, while gasoline gained nearly 2 cents to $2.1860 a gallon.
On London’s International Petroleum Exchange, November Brent rose 13 cents to $63.10 a barrel.
The acting secretary of the Organization of Petroleum Exporting Countries, speaking Wednesday at a conference in Johannesburg, blamed the worldwide lack of refining capacity for soaring prices.
Adnan Shihab-Eldin said there would be no improvements to refining capacity before 2007, though there were now "encouraging signs from some of the majors on refining."
In the storm-devastated U.S. Gulf area, several refineries have yet to restart after suffering damage and electricity outages from Hurricane Rita. A total of 20 refineries accounting for 4.8 million barrels a day of crude oil processing capacity, or 28 percent of the U.S. daily total, were shut last weekend, and seven have no restart timetable.
Daily crude oil production of 1.5 million barrels in the Gulf of Mexico remains completely shut down while natural gas production is only running at 22 percent of normal daily capacity, the U.S. federal Minerals Management Service said Tuesday.
Valero Energy Corp. said Tuesday it has restarted its Houston refinery and is working on restarting its refinery in Texas City,Texas, but its 255,000-barrel-a-day refinery in Port Arthur, Texas, will be out two to four weeks.
Exxon Mobil Corp.’s mammoth 557,000-barrel-a-day Baytown, Texas, refinery has begun to restart, while Royal Dutch Shell PLC said its Port Arthur refinery has sustained some damage.
"The overall picture for the refineries is bleak," said Scott Meyers, senior trading analyst for New York brokerage Pioneer Futures Inc. "The unleaded gasoline and heating oil futures may continue to rise and take the crude with them."
The U.S. Department of Energy will release weekly petroleum stocks data Wednesday. Analysts expect across-the-board declines in crude, gasoline and distillates, which group heating oil, diesel and jet fuel.
Analysts are most concerned about the production of distillates ahead of the Northern Hemisphere winter.
"If it’s cold, you need to turn on the heating. It’s not like gasoline, which you can conserve," said Victor Shum, oil analyst at Purvin & Gertz, referring to U.S. President George W. Bush’s call earlier this week for consumers to save gasoline.
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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.