Oil Prices Increase Nearly $2 a Barrel
Oil prices rose by nearly $2 a barrel Wednesday, as traders reacted to a drop in U.S. crude inventories and signs that production along the Gulf Coast would be slow to rebound from damage caused by Hurricane Katrina.
The cost of benchmark light, sweet crude for October delivery jumped $1.98, or more than 3%, to $65.09 a barrel on the New York Mercantile Exchange. The increase followed price declines in six of the previous seven trading sessions.
Futures prices for natural gas, heating oil and gasoline followed crude upward on the Nymex. Analysts said the increases were triggered by Energy Department data that showed larger-than-expected inventory declines for oil and distillates, which include heating oil and diesel.
“Crude and distillate inventories went down, so the market rallied,” said Tim Evans, senior energy analyst with IFR Energy Services. But Evans questioned the market’s reaction.
“There is enough crude oil. Distillates, including heating oil, are not in short supply. Natural gas is not in short supply,” Evans said. With higher-than-normal temperatures forecast in key markets this winter, he said, “there’s really no reason to panic.”
Nonetheless, an Energy Department official warned Wednesday that this winter, consumers could pay an average of 47% more for natural gas than last year.
The good news for consumers Wednesday was that fuel output rose and gasoline inventories increased 1% to 192 million barrels during the week that ended Friday, according to the Energy Department’s weekly report. The stockpile remains 7% below year-ago levels, but Evans said gasoline supplies were sufficient because the government data showed that high prices were reducing gasoline demand.
Demand for gasoline fell to 8.6 million barrels a day, the department said, down about 10% from as many as 9.5 million barrels at times last month.
On Wednesday, retail gasoline prices continued their slow retreat from their recent record highs, according to a daily survey by AAA. The nationwide average declined almost 2 cents overnight to $2.935 for a gallon of self-serve regular, and the California average fell less than a penny, to $3.026.
In Washington, where lawmakers are still feeling heat from consumers angry about gasoline prices, the Senate on Wednesday approved an amendment that would require the Federal Trade Commission to immediately investigate gasoline prices in the aftermath of Katrina, including allegations of price gouging.
The measure, attached to a spending bill that funds a number of federal agencies, calls for the trade commission to report its findings and any proposals for legislation to Congress within 180 days of the bill’s approval. Once the bill clears the Senate, it still must be reconciled with a House bill, which did not include such a provision.
“We must find out -- not speculate, not accuse, not assume -- but find out whether or not gas price gouging is occurring through the supply chain or distribution markets,” said Sen. Mark Pryor (D-Ark.), one of the amendment’s sponsors. “This investigation will help us get to the root cause of exorbitant gas prices, and I believe it sends a strong signal to the American people that their concerns about skyrocketing gas prices are being heard.”
Pryor said the probe would include a “comparison and reasons for changes in profit levels over the past year for companies involved in the production, distribution or sale of petroleum products.”
Douglass reported from Los Angeles, Simon from Washington.
