Outages send oil prices to record highs
Oil prices reached record highs for the seventh straight session Wednesday after refineries in California and Texas said they had new outages and the government reported surprisingly large declines in oil inventories.
Although oil futures jumped to a new trading high of $82.51 a barrel in the moments after the inventory report was released in the morning, they spent much of the day alternating between gains and losses before reports of refinery outages led to late-session buying.
Light sweet crude for October delivery rose 42 cents to settle at a record $81.93 a barrel on the New York Mercantile Exchange.
Chevron Corp. had a piece of gasoline-making equipment fail at its 266,000-barrel-a-day refinery in El Segundo, and ExxonMobil Corp. shut down a crude processing unit at its 348,000-barrel-a-day refinery in Beaumont, Texas, according to industry reports. The effect on production was unclear.
Nymex gasoline rose 3.31 cents to settle at $2.093 a gallon.
Meanwhile, analysts said Wednesday’s report from the Energy Information Administration was mixed. Crude inventories fell last week, but much of that drop appears to be because Hurricane Humberto disrupted shipping and refinery operations along the Gulf Coast, said Tim Evans, an analyst at Citigroup Inc.
Crude inventories fell by 3.8 million barrels in the week that ended Sept. 14, the administration said, more than double the 1.5-million-barrel decline that analysts surveyed by Dow Jones Newswires, on average, had expected. But crude inventories remain at the upper end of their average range for this time of year.
Crude supplies dropped much more along the Gulf Coast than at the key Nymex delivery point of Cushing, Okla.
“It’s perhaps less of a support to the market than it might appear at first glance,” Evans said.
Refinery utilization fell 0.9 of a percentage point to 89.6% of capacity last week. Analysts expected a drop of 0.5 of a percentage point. However, gasoline supplies rose by 400,000 barrels, the Energy Department arm said, countering analysts’ predictions of a 1.3-million-barrel decline.
Evans attributed that increase to higher gasoline production and lower demand. Despite the decline in refinery utilization, gasoline production rose by 159,000 barrels a day, on average. Demand, meanwhile, fell by 146,000 barrels last week.
“Demand is a little bit languid at this point,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.
Many analysts attribute the lower demand to high gasoline prices and the end of the peak summer driving season. At the pump, gasoline prices rose 0.3 of a cent overnight to a national average of $2.79 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag behind the futures market, peaked at $3.227 a gallon in late May.
