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Oil Prices Fall As Crude Stocks Swell

Posted on: Thursday, 13 April 2006, 09:00 CDT

By GEORGE JAHN

VIENNA, Austria - Oil prices slid Thursday after the U.S. government reported that its national crude stocks swelled last week to their highest level in eight years. Gasoline prices also fell after a runup a day earlier.

But analysts say gasoline futures may rebound in coming days because U.S. supplies are relatively tight, and peak summer demand is approaching.

Light, sweet crude for May delivery on the New York Mercantile Exchange fell 57 cents to $68.05 a barrel in electronic trading by afternoon in Europe. The contract lost 36 cents Wednesday.

June Brent crude futures on London's ICE Futures exchange shed 60 cents to $69.26 a barrel.

Gasoline futures declined nearly 3 cents to $2.0625 a gallon after rising 3.67 cents on Wednesday.

Heating oil fell 2.5 cents to $1.9524 a gallon on Thursday. Natural gas dipped nearly 7 cents to $6.763 per 1,000 cubic feet.

Inventories of crude oil rose 3.2 million barrels to 346 million barrels, their highest level since early 1998, the U.S. Energy Department reported. It was the third straight weekly build in crude stocks.

With refiners apparently still undergoing seasonal maintenance ahead of the summer driving season, petroleum products continued to shrink.

Gasoline inventories dropped 3.9 million barrels in the week ending April 7 to 207.9 million barrels - down nearly 2 percent from year-ago levels. Meanwhile, U.S. gasoline demand was higher, the report said, averaging 9.1 million barrels a day over the past four weeks, or 1.2 percent above a year ago.

"These stock figures are likely to fan already looming supply worries, a fact likely to be reflected in already high retail prices," said Vienna's PVM Oil Associates.

Distillate inventories, which include diesel and heating oil, dropped 4.6 million barrels to 117.4 million barrels. They remain more than 12 percent above year-ago levels.

As the summer driving season approaches, not only are refineries still recovering from the hurricanes that struck the U.S. Gulf of Mexico last year - and drove crude futures to their all-time trading high of $70.85 a barrel - but they are also struggling with the prospect of tight ethanol supplies. Ethanol is increasingly being blended with gasoline as refiners phase out their use of additive MTBE, a groundwater contaminant.

Meanwhile, the International Energy Agency said rising energy futures appear to be crimping demand.

In its monthly oil market report Wednesday, the energy watchdog trimmed its estimate for growth in world oil demand this year to 1.47 million barrels a day, while noting that total demand would likely climb to 85.1 million barrels a day. Still, "the negative effects of high oil prices are visible in most areas," the report said.

Source: Associated Press/AP Online

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