Oil prices dropped by more than $1 a barrel April 27 after the U.S. government reported a large build in crude oil inventories.
Light, sweet crude for the June contract fell $1.10 to $53.10 a barrel on the New York Mercantile Exchange, where prices dipped as low as $52.90. Unleaded gas futures dropped by 4.5 cents to $1.58 a gallon, while heating oil futures fell 2.29 cents to $1.485 a gallon. In London, Brent crude fell 89 cents to trade at $53.25 on the International Petroleum Exchange.
The U.S. Energy Department said April 27 that the inventories of crude oil in the largest consuming nation grew by 5.5 million barrels the week of April 18 to 324.4 million barrels.
Unleaded gasoline supplies shrank by 300,000 barrels to 211.3 million barrels and the inventory of distillate fuel, which includes diesel and jet fuel, fell by 1.4 million barrels to 102.6 million barrels. Prices had been falling since U.S. President George W. Bush called on Saudi Arabia’s Crown Prince Abdullah April 25 to expand production, in a bid to ease U.S. gasoline prices that have shot above $2.20 a gallon.
Analysts say the Bush-Saudi meeting was a signal that both sides recognized that current high prices needed to be addressed, thus sending prices downward.
Saudi Arabia has outlined a plan to increase production capacity to 12.5 million barrels a day by 2009 from the current 11 million limit. Saudi Arabia now pumps about 9.5 million barrels daily.
Abdullah’s foreign affairs adviser, Adel Al-Jubeir, told reporters the price is being driven up by a shortage of refining capacity.
“What we have done is explain to the U.S. what our production capabilities are,” he told reporters about the meeting. “We also explained to the U.S. — and we have for months — what our plans are for adding to that capacity in the future years.”
Iran thinks market oversupplied
Global petroleum markets aren’t short of crude oil, Iran’s oil minister said April 26. “I think the market is oversupplied,” Bijan Namdar Zangeneh told reporters during a natural gas conference in Port-of-Spain, Trinidad. “We have no difficulties on the supply side.”
Iran is a member of the Organization of Petroleum Exporting Countries. Officials from two other OPEC members, Saudi Arabia and the United Arab Emirates, have said a global lack of refining capacity, not a shortage of crude, is to blame for an almost 50 percent surge in prices over the last year.
Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures, said the Bush meeting with the Saudi prince, and high crude inventories has made current market sentiment very bearish:“If we don’t see any supply disruptions, we might even see $45 in the gasoline season,” he said.
—The Associated Press
