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Oil Prices Jump More Than $2 Per Barrel

Posted on: Thursday, 3 November 2005, 18:00 CST

By BRAD FOSS

Crude-oil futures jumped more than $2 a barrel Thursday in buying that some analysts ascribed to bargain-hunting after prices had settled below $60 a barrel for three straight days.

Light sweet crude for December delivery rose $2.03, or 3 percent, to settle at $61.78 a barrel on the New York Mercantile Exchange. Crude futures settled below $60 a barrel for the first time in three months on Monday due to relatively mild temperatures in the U.S. Northeast.

Oil analyst John Kilduff of Fimat USA in New York said he was not surprised to see buyers step into the market given the near-15 percent drop in oil prices since the summertime peak above $70 a barrel. But he does not expect prices to zoom higher from here.

"We're still in a pronounced downward channel," said Kilduff, who believes the high price of gasoline and other fuels is causing demand to taper off.

But analyst Phil Flynn of Alaron Trading Corp. in Chicago said he senses a psychological shift in the market.

Flynn said "it's easy to be bearish in October," before colder weather envelops the Northeast and Midwest and demand for home-heating fuels rises. "It gets a lot harder in November."

Nymex heating oil futures gained more than 5 cents to close at $1.8336 a gallon, while gasoline rose 5.77 cents to settle at $1.6268 a gallon.

Natural gas futures rose 8.5 cents to settle at $11.689 per 1,000 cubic feet.

December Brent crude futures on London's ICE Futures exchange - formerly the International Petroleum Exchange - rose $2.14 to settle at $60.52 a barrel.

Broker Tom Bentz of BNP Paribas Commodity Futures in New York said the rise in oil prices was a "technical rally" that reflected short-covering, in which traders who had banked on even lower prices were forced to cover their bets, pushing prices higher.

On Wednesday, the U.S. government released data that showed rising supplies of oil and gasoline. The EIA data also showed that average daily gasoline demand over the past four weeks was 1.7 percent below year-ago levels. However, the gap is narrowing because consumption has been rising week to week since the start of October.

Gasoline futures are sharply below their late August peak of $70.85 per barrel due to the partial recovery of refinery operations along the Gulf coast in the aftermath of hurricanes Katrina and Rita. Three refineries remain shut: BP PLC's 437,000-barrel-per-day plant in Texas City, Texas, ConocoPhillips' 225,000-barrel-per-day plant in Belle Chasse, La., and Murphy Oil Corp.'s 125,000-barrel-per-day plant in Meraux, La. Six others in Texas and Louisiana are running at reduced rates, according to the Energy Department.

Still, analysts remain concerned that U.S. output of oil and natural gas remains constrained by hurricane-related damage to platforms and pipelines. The U.S. Minerals Management Service said Thursday that 52 percent of daily oil production and 47 percent of natural gas production in the Gulf of Mexico remained off-line, slightly lower than Wednesday.

Source: Associated Press/AP Online

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