commodities boom 'to last', page-2

crude oil rose to a record Just as well that BHP has oil and gas.


Oil Rises to a Record $72.40 a Barrel After U.S. Supplies Drop
April 19 (Bloomberg) --

Crude oil rose to a record $72.40 a barrel in New York after the Energy Department reported that oil and gasoline inventories declined.

Oil supplies fell 806,000 barrels to 345.2 million in the week ended April 14, the report showed. Gasoline stockpiles plunged 5.4 million barrels as refiners finished maintenance of units before the peak-demand summer months. Contracts for oil closest to expiration are cheaper than those for delivery later this year because of concern over future supplies.

``Gasoline supply and prices are driving things,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc., in Englewood, New Jersey. ``The fall in crude stocks was a big surprise.''

Crude oil for May delivery rose 82 cents, or 1.2 percent, to $72.17 a barrel on the New York Mercantile Exchange, the highest close since trading began in 1983. Oil touched $72.40, an intraday record. Oil for June delivery rose $1.03 to $74.12 a barrel, a $1.95 premium over the May contract. The July contract rose $1.11 to $75.08 a barrel. The May contract expires tomorrow.

Oil surged to a record yesterday after U.S. President George W. Bush said ``all options are on the table'' to keep Iran, the fourth-biggest oil producer, from developing nuclear weapons. The previous record of $70.85 a barrel was reached on Aug. 30, the day after Hurricane Katrina struck production platforms and refineries along the U.S. Gulf of Mexico coast.

About 22 percent of Gulf oil production and 13 percent of gas production is still out of service, according to a report from the Minerals Management Service. Concern that the storm season, running from June to November, may bring further disruption has helped push oil higher.

Deficit Widening

``We still haven't recovered from the hurricanes,'' Fohsz said. ``The deficit just keeps on widening.''

Refineries operated at 86.2 percent of capacity, up 0.7 percentage point from the week before, the report showed. Plants operated at 91.8 percent of capacity during the same week last year. Refiners often shut units for maintenance, also known as ``turnarounds,'' in February and March as heating-oil demand falls and gasoline use has yet to rise.

``Refiners are increasing runs, so we will soon be seeing increased gasoline stocks,'' said Aaron Kildow, a broker at Prudential Financial Derivatives LLC in New York. ``With these cracks they will be producing all they can.''

The profit margin for turning three barrels of crude oil into two barrels of gasoline and one of heating oil was $19.405, based on futures prices in New York, up 28 percent in the last month.

Gasoline for May delivery rose 1.55 cent, or 0.7 percent, to $2.2394 a gallon in New York, the seventh-straight weekly gain and the highest close since Sept. 29. Futures touched $2.25, the highest since Sept. 30. Gasoline is up 42 percent in a year.

Liability Protection

The energy bill that Congress passed last year and other government rules affecting the blending of gasoline are contributing to the jump in gasoline prices, former Exxon Mobil Corp. chairman Lee Raymond said yesterday evening at a forum at Columbia University.

The legislation, signed by President Bush in August, failed to provide liability protection for refiners that add MTBE to gasoline, requiring them to switch to ethanol by May. That switch was poorly timed, forcing refiners, distributors and gas stations to empty their tanks and creating ``an apparent shortage of gasoline,'' he said.

``You shouldn't be talking to me,'' Raymond said yesterday evening during a question-and-answer session at the university in New York. ``You should be down asking your representatives in Congress how did they let this happen.''

Raymond also said that Congress ignored warnings from the industry that switching to ethanol would reduce supplies, since less of the additive can be mixed into fuel compared with MTBE.

Inflation Increase

Inflation in the U.S. accelerated in March as gasoline prices jumped, posing a dilemma for Federal Reserve policy makers who signaled yesterday they may soon stop raising interest rates. The 0.4 percent rise in the consumer price index followed a 0.1 percent increase in February and was led by higher costs for gasoline and rents, the Labor Department said today.

The price of regular gasoline at the pump, averaged nationwide, jumped 12 percent in the last month, according to AAA, the nation's largest motorist organization. The price is up 26 percent from a year ago. Gasoline rose 1.1 cent to $2.801 a gallon yesterday.

British Prime Minister Tony Blair warned against sending a ``message of weakness'' to Iran and backed Bush's vow to keep military options open to prevent the country from acquiring nuclear weapons. Blair spoke in Parliament today after a lawmaker asked him for an ``absolute assurance'' that the U.K. wouldn't support military action against Iran.

`Message of Weakness'

``At a point in time when the president of Iran is talking about wiping Israel off the face of the earth and when there are young people signing up to be suicide bombers, I do not think that this is the time to send a message of weakness,'' Blair said.

The United Nations Security Council demanded the suspension of Iran's program by the end of this month as the UN's nuclear agency checks Iranian claims that it produced a supply of enriched uranium sufficient to fuel a reactor. The U.S. considers the program a front for the development of nuclear weapons. Iran maintains that the program is for electricity generation.

``We continue to press higher for the same reasons for the last few weeks,'' said Tom Bentz, an oil broker with BNP Paribas Commodity Futures Inc. in New York. ``Iran is probably the biggest factor, with the war of words heating up.''

Nigerian Unrest

Unrest in Nigeria, Africa's biggest oil producer, has slashed output this year. OPEC President Edmund Daukoru said yesterday about 500,000 barrels a day of output, or a fifth of Nigeria's production, remains halted. Daukoru is also Nigeria's oil minister.

Nigerian militants rejected a plan for development in the country's oil-producing region and issued fresh threats against oil companies today. President Olusegun Obasanjo announced a plan yesterday to create jobs and finish a highway to aid development in the Niger delta.

``At a time of our choosing, we will resume our attacks with greater devastation and no compassion on those who choose to disregard our warnings,'' Jomo Gbomo, a spokesman for the Movement for the Emancipation of the Niger Delta, or MEND, said in an e-mail statement.

Brent crude oil for June settlement rose $1.22, or 1.7 percent, to $73.73 a barrel on the London-based ICE Futures exchange, the highest intraday close since the contract began trading in 1988. Futures touched $74 a barrel, an intraday record.