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Crude futures climb back above $55 a barrel Oil prices 40% higher than year ago; EIA official says demand growth will be there, inventory surpluses going to disappear Brad Foss The Associated Press
Crude futures climbed 3 percent to settle above $55 a barrel June 3 as traders’ supply fears were bolstered by an Energy Department official who predicted new record highs for oil prices because of “paltry” domestic inventory levels.
Analysts have noted a variety of factors putting upward pressure on oil prices in recent days — from U.S. refinery snags to the hospitalization of Saudi Arabia’s King Fahd — though the most prominent has been concern that as refiners strive to meet today’s strong demand for gasoline and diesel, they could end up having difficulty producing enough heating oil later in the year.
As a result, heating oil futures have surged more than 10 percent in the past week, climbing 5.73 cents to $1.5595 a gallon June 3 on the New York Mercantile Exchange. Cook says might see $60 oil John Cook, director of the petroleum division at the agency’s Energy Information Administration, helped justify the oil market’s nervousness, telling Dow Jones Newswires “I think we’ll see new records, not necessarily by much, but I think we may even average $60 for a month.”
“The demand growth is going to be there, and the inventory surpluses we have are pretty paltry to begin with and they are going to disappear,” Cook was quoted as saying.
Light sweet crude for July delivery climbed $1.40 to $55.03 a barrel June 3 on Nymex, rising eight out of the nine past trading sessions. On June 2, prices finished 97 cents lower at $53.63.
Gasoline futures increased by 4.17 cents to $1.5571 per gallon.
Oil analyst Tim Evans of IFR Energy Services in New York said he considered Cook’s comments to be irresponsible, given the climate of fear already permeating the market.
“He’s acting more like a cheerleader for the rally than he is an analyst, or a keeper of the numbers,” said Evans, whose own analysis has led him to conclude that hype and speculation — not genuinely tight supplies — have pushed oil prices to record levels.
“There is this ingrained belief that even if the market’s not tight today, it’s going to be tomorrow,” Evans said.
But broker Tom Bentz of BNP Paribas Commodity Futures in New York said Cook’s comments merely confirmed what many traders have been saying for months. Still, Bentz said he was “a little surprised that he would make those comments ... It just sparks fear.”
Jonathan Cogan, a spokesman for the EIA, said he spoke with Cook after the publication of the Dow Jones story and that Cook emphasized to him that the prediction of $60 a barrel oil was not considered “our most likely scenario, though it was certainly a possible scenario.”
On June 2, the EIA said inventories of crude oil rose last week by 1.4 million barrels to 333.8 million barrels, or 11 percent above last year, while gasoline inventories grew by 1.3 million barrels to 216.7 million barrels, up 6 percent from a year ago.
But distillate fuel supplies rose by only 700,000 barrels to 106.4 million barrels, or roughly equal to year-ago levels. That added to worries that there might not be enough heating oil and diesel output for the next winter season in the Northern Hemisphere. Xie: Growing inventories should lower prices But Morgan Stanley economist Andy Xie said “the market is making a mistake in assuming linkages between distillate prices and crude prices,” adding that the growing crude inventories should lower prices. “With higher inventory numbers and a substantial number of investors backing off in the summer, declining price levels to $40 is possible.”
At the moment, oil prices are 40 percent higher than a year ago.
The Organization of Petroleum Exporting Countries meets June 15. Analysts believe the 11-member group will not reduce its current output of 30 million barrels daily.
On June 1, OPEC President Sheik Ahmed Fahd Al Ahmed al-Sabah said the group would maintain its current production ceiling until the third quarter of 2005.
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