Oil Prices Fall on Drop in Gas Futures

By BRAD FOSS

Crude oil and gasoline futures fell Tuesday after President Bush said he would waive regional clean-air specifications for summer-grade gasoline in order to attract more imports of motor fuel to the United States.

President Bush also said he would halt deposits of oil to the nation’s strategic petroleum reserve until fall, but analysts said the measure would have little impact on crude prices and certainly not help make gasoline any cheaper.

John Kilduff, an analyst at Fimat USA in New York, said the Bush administration should have gone further, by eliminating tarriffs on ethanol imports, but said the action on gasoline specifications would indeed help alleviate supply constraints.

Light sweet crude for June delivery fell by 53 cents to $72.80 a barrel on the New York Mercantile Exchange, following a sharp decline in gasoline futures, which slid by close to 8 cents a gallon.

Gasoline futures for May delivery fell 7.39 cents to $2.10 a gallon.

A high floor remains underneath oil and gasoline prices because of a variety of geopolitical tensions.

Ali Larijani, Iran’s top nuclear negotiator, said the nation would end its cooperation if the Security Council imposes sanctions against it, and threatened to go further and hide its nuclear program if the West takes any other "harsh measures."

Those were Iran’s strongest statement of defiance before a Friday deadline the Security Council has given the country to stop all uranium enrichment. They came a day after Iran’s president predicted the Security Council would not impose sanctions and warned he was thinking about dropping out of the Nuclear Nonproliferation Treaty.

The United States, Britain and France claim Iran wants to use enriched uranium for nuclear weapons, not just electricity generation. Iran denies the charge, but Washington has been pressing fellow members of the Security Council to impose tough economic sanctions against Iran, which could affect its oil exports.

Venezuela, another major oil producer, unsettled the market over the weekend by reasserting its intention to give the state greater control of oil fields being operated by foreign-owned oil companies.

Concerns about gasoline supplies in the U.S. ahead of the summer driving season also kept a high floor under prices. U.S. gasoline stocks are expected to show another big decline – of 2.4 million barrels – for the eighth consecutive week in government data due Wednesday, according to a Dow Jones Newswires survey of energy analysts.

Gasoline stocks tend to build this time of year, but because of relatively low refinery utilization and an ongoing effort by refiners to dump gasoline stocks blended with the additive MTBE, they have posted big declines in recent weeks.

In the seven weeks ended April 14, gasoline stocks declined by more than 23 million barrels, according to last week’s U.S. Energy Information Administration report. A projected draw of 2.4 million barrels would push stocks more than 6 million barrels below their five-year average for this time of year, according to EIA analyst Doug MacIntyre.

Distillate stocks, which include heating oil and diesel fuel, are expected to fall by 1.2 million barrels, while crude stocks were expected to show a draw of 137,500 barrels.

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AP Business Writer Brad Foss in Washington contributed to this report. Gillian Wong reported from Singapore.