Gas and Crude Oil Prices Dive As U.S. Inventory Levels Surge

Prices of natural gas, crude oil and gasoline fell sharply Wednesday after industry reports showed inventories rising much faster than expected. The news also hammered many energy stocks.

At the New York Mercantile Exchange, crude oil for June delivery slid $1.14 to $27.80 a barrel. June unleaded gasoline futures fell 2.83 cents to $1.03 a gallon.

Meanwhile, June natural gas futures in New York dived 15.8 cents, or 3.4%, to $4.483 per million British thermal units--the lowest close for a most-active gas contract since last August.

Keying the market’s action was a weekly estimate on oil use and stockpiles by the American Petroleum Institute, released after markets closed Tuesday.

The group said U.S. crude oil inventories rose by 8.3 million barrels to 322 million barrels as of April 27. That was nearly 22 million barrels, or 7%, above the level at the same time last year, and the highest level since August 1999.

The data jolted analysts, who on average had forecast an inventory decline of 3.5 million barrels.

The crude supply “essentially guarantees that if the gasoline market lacks supply this year, it won’t be from a lack of refinery feed,” said Tim Evans, senior market analyst at IFR-Pegasus.

The American Petroleum Institute also said gasoline inventories rose 3 million barrels last week, more than the 1.2 million barrels analysts expected.

Last year, low inventories of gasoline heading into the summer driving season caused price spikes in many areas. Gasoline futures hit an all-time high of $1.163 a gallon on Monday amid supply jitters.

Now, gasoline inventories are just 3.7 million barrels below the year-ago level.

“Production levels at the refineries are starting to increase and that’s a good sign,” U.S. Energy Secretary Spencer Abraham said.

On the natural gas front, an inventory gain of 102 billion cubic feet reported by the American Gas Assn. for last week was 46% larger than the increase expected by analysts in a Bloomberg survey.

Mild weather last week reduced demand for gas heat, enabling distributors to put more of the fuel into storage for later use.

The 14% inventory gain left U.S. supplies in underground storage at 850 billion cubic feet, highest since February, the association showed.

Still, inventories remain 20% lower than a year earlier.

Natural gas prices soared last year as the coldest November and December in more than a century drained supplies to the lowest level since the American Gas Assn. began keeping records in 1993.

Increased supplies are needed to meet demand this summer from utilities that burn gas to generate electricity for air conditioning, as well as from distributors storing gas for use next winter.

With energy prices falling, Wall Street took profits in many oil and gas stocks. The sector had been rallying briskly in recent weeks.

Exxon Mobil (ticker symbol: XOM) dropped $2.30 to $86.50, Chevron (CHV) slid $4.45 to $92 and Amerada Hess (AHC) fell $4.67 to $82.29.

Among refiners, Tosco (TOS) was off $2.66 to $43.04, Valero (VLO) dropped $4.44 to $43.41 and Sunoco (SUN) fell $2.30 to $35.94.