What do you guys think another day of consolidation following the recent run up, or will we head forward again will the march forward of oil prices?
The following article was taken from Bloomberg this morning with analysts concerned about the upcoming US driving season and the effects on oil prices, a good read for those who are interested.
Crude Oil Gains on Skepticism Gasoline Output Will Meet Demand
By Mark Shenk
May 23 (Bloomberg) -- Crude oil rose on skepticism that U.S. refineries can produce enough gasoline to keep up with increasing consumption of the motor fuel.
U.S. gasoline supplies rose 1.43 million barrels last week, an Energy Department report showed today. Gasoline use averaged 9.36 million barrels a day in the past four weeks, up 1.2 percent from a year ago, the department said. Refineries operated at the highest rate since Jan. 5. Prices also rose after UN inspectors said they were learning less about Iran's nuclear program.
``There's no evidence that high prices are reducing demand,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``More product will definitely be supplied to the market because of increased refinery activity. It's unclear that this will lead to higher inventories or just go to satiate strong demand.''
Crude oil for July delivery rose 26 cents, or 0.4 percent, to settle at $65.77 a barrel at 2:47 p.m. on the New York Mercantile Exchange. Prices are 8.3 percent lower than a year ago.
U.S. refineries operated at 91.1 percent of capacity, up 1.6 percentage point from the week before, the report showed.
``We'll probably see a little moderation as refiners try to catch up,'' said Christopher Edmonds, the managing principal of Energy Research & Capital Partners in Atlanta. ``We've had a lot of maintenance issues, planned and unplanned, and we're still catching up from two years ago.''
U.S. refineries haven't operated above 93.8 percent of capacity since September 2005 when plants were shut because of hurricanes Katrina and Rita, Energy Department figures show. Refiners operated at 98.1 percent of capacity in the week ended July 1, 2005, and operated at an average 95 percent of capacity in the months of May, June and July 2005.
Gasoline Stockpiles
Gasoline stockpiles have increased 1.8 percent to 196.7 million barrels in the past three weeks, the report showed. Inventories fell in the previous 12 weeks. Supplies in the week ended May 18 were 7 percent lower than the five-year average for the period, the department said.
``Inventories are growing but we are still in big trouble with gasoline supplies,'' said Phil Flynn, vice president of risk management at Alaron Trading Corp. in Chicago. ``Supplies should be much higher going onto the Memorial Day weekend.''
U.S. gasoline consumption peaks during the summer driving season, which lasts from the Memorial Day holiday in late May to Labor Day in early September.
``We need to see 3-million-barrel builds,'' said Peter Meyer, a commodity trader for Lehman Brothers Holdings Inc. in New York. ``We need to see 95 percent refinery utilization in order to be comfortable about adequate gasoline supplies this summer. If we don't see a 95 percent utilization rate, $4 gasoline is a sure thing.''
Gasoline Prices
Gasoline for June delivery in New York rose 0.41 cent to close at $2.3104 a gallon. Prices plunged 4 percent yesterday, the biggest decline since Jan. 16.
Regular gasoline at the pump, averaged nationwide, rose 1.2 cent to a record $3.221 a gallon yesterday, according to AAA, the nation's largest motorist organization. Retail gasoline prices are up 12 percent from a year ago.
Curtailment of supplies from Nigeria and concern that a dispute over Iran's nuclear program might disrupt shipments from the second-biggest producer in the Middle East has bolstered prices since January 2006.
United Nations nuclear inspectors are learning less about Iran's atomic work than they did before the Security Council imposed sanctions, exacerbating concern that Iran may be diverting uranium for military purposes.
Deteriorating Knowledge
``Because the Agency has not been receiving for over a year information that Iran used to provide'' the Agency's ``level of knowledge of certain aspects of Iran's nuclear-related activities has deteriorated,'' read a four-page International Atomic Energy Agency report transmitted to the Security Council.
The U.S. Navy conducted unannounced exercises in the Persian Gulf off the Iranian coast today involving two carrier strike groups and amphibious assault ships with 17,000 Marines, the Associated Press reported. Nine American warships passed through the Strait of Hormuz, AP said.
``Iran had taken a back seat lately but appears to be moving back to the forefront,'' Flynn said. ``The naval maneuvers in the Strait of Hormuz are a reminder of how vulnerable oil supplies are.''
Strait of Hormuz
The Strait of Hormuz is the world's most important oil transit chokepoint. Almost a quarter of the world's oil flows through the narrow waterway between Iran and Oman at the mouth of the Persian Gulf.
Brent crude oil for July settlement rose $1.08, or 1.6 percent, to close at $70.60 a barrel on the London-based ICE Futures exchange, the highest close since Aug. 28. Disruptions to Nigerian supply pushed Brent prices higher, since the country's oil is priced in relation to the grade that is produced in the North Sea.
West Texas Intermediate crude oil, or WTI, traded at a record $5.83 a barrel discount against Brent on April 11, based on closing futures prices. The spread between the July Brent and Nymex contracts widened to $4.83 a barrel today.
NWE Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
