The price hikes and inventory declines suggest the refining industry is easing back from what had been a scramble to produce more gasoline to supply the peak summer driving season, which ends this weekend.
"It drives home the ... continued tightness in gasoline inventories," said Antoine Halff, head of energy research at Fimat USA LLC.
Prices at the pump rose 1.3 cents today to a national average of $2.758 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May. At the time, gasoline futures rallied as the refining industry experienced an unprecedented number of unexpected maintenance and operational outages.
But as the summer progressed, refiners boosted output and gasoline inventories rose. That led to a steep sell-off in gasoline futures, and retail prices followed.
Now, Halff said, "it looks like we might have hit the top of refinery runs for the season."
The Energy Department's Energy Information Administration reported that refinery utilization rates fell 1.3 percentage points to 90.3 percent of capacity in the week ended Aug. 24. Analysts surveyed by Dow Jones Newswires, on average, had expected no change.
The decline in activity helped cut gasoline inventories by 3.6 million barrels. Analysts had expected a 1.8 million barrel decline. The combination could mean gasoline supplies will continue falling, pushing prices higher, Halff said.
Light, sweet crude for October delivery rose $1.78 to settle at $73.51 a barrel on the New York Mercantile Exchange, while September gasoline rose 8.54 cents to settle at $2.1008 a gallon.
In London, October Brent crude rose $1.58 to settle at $72.13 a barrel on the ICE futures exchange.
The EIA also reported that crude oil inventories fell 3.5 million barrels, much more than the 800,000 barrel decrease analysts expected. Distillate stocks, which include diesel and heating oil, increased 900,000 barrels, more than the 600,000 barrel increase analysts forecast.
Gasoline imports rose 66,000 barrels to 993,000 barrels a day on average, and crude oil imports fell 993,000 barrels to an average of 9.8 million barrels a day.
Gasoline demand averaged more than 9.6 million barrels a day over the last 4 weeks, 0.5 percent above the same period last year, the EIA said.
Jason Schenker, an energy economist at Wachovia Corp., thinks the decline in crude inventories "may have been a transitory phenomenon resulting from Hurricane Dean."
Dean passed through the southern Gulf last week, disrupting some oil supply routes.
Despite the declines in refinery activity and gasoline inventories, Schenker maintains his view that the gas and oil markets have peaked for the year. Concerns about economic growth continue to weigh on energy markets, and it should come as no surprise that refiners are reacting to the approach of fall by cutting production, he said.
"Gasoline inventories are trending down at the end of the driving season," Schenker said.
In other Nymex trading, September heating oil rose 4.56 cents to settle at $2.0419 a gallon. Heating oil inventories are below year-ago levels, and prices are higher, which could mean high heating bills this winter for heating oil customers.
The expiring September natural gas contract fell 16.3 cents to settle at $5.43 per 1,000 cubic feet on expectations that inventories will rise in a government report on Thursday and on new forecasts suggesting that tropical storm systems in the Atlantic are not developing as fast as expected. October natural gas, which now becomes the front-month contract, fell 18 cents to settle at $5.581 per 1,000 cubic feet.
Natural gas inventories are already at record levels, and prices are lower than they were a year ago, which could be good news this winter for people who rely on natural gas for heating.
Via: Chronby
