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A late rally fails to stick as oil prices fall despite unrelenting rise in gasoline prices

A late rally fails to stick as oil prices fall despite unrelenting rise in gasoline prices

Oil prices fell Monday and gasoline prices rose after another series of refinery problems were reported over the weekend.
Crude oil traders attempted a late rally, briefly pulling oil into positive territory before concerns about a glut of oil building up in the supply chain for refineries reasserted themselves in the market.
Light, sweet crude for June delivery fell 75 cents to settle at $65.71 a barrel on the New York Mercantile Exchange. On Friday, crude surged above $66 a barrel after Saudi Arabia announced the arrests of 172 Islamic militants, some of whom allegedly planned to attack oil fields.
Brent crude for June delivery dropped 76 cents to settle at $67.65 a barrel on London's ICE Futures exchange.
Gasoline futures jumped 7.92 cents to settle at $2.4405 a gallon.
"It's basically talk of refinery outages" that is moving gasoline prices higher, said Antoine Halff, an analyst with Fimat.
Recent problems include a fire and explosion on Friday that temporarily shuttered Gary Williams Energy Corp.'s 50,000 barrel-per-day refinery in Wynnewood, Oklahoma, and the shutdown on Saturday of portions of ConocoPhillips' 247,000 barrel-per-day refinery in Sweeny, Texas, due to power outages, wrote Man Energy analyst Edward Meir in a research note.
Halff said there are few regulations requiring refiners to report outages. Traders suspect there could be more problems refiners aren't announcing.
"It's a bunch (of problems)," Halff said.
The refinery problems put more pressure on U.S. gasoline inventories, which have fallen for 11 weeks in a row. Last week's U.S. Energy Department report showed an unexpected drop of 2.8 million barrels in U.S. gasoline stockpiles and said U.S. refinery use declined to 87.8 percent of capacity.
With the start of the summer driving season about a month away, some analysts wonder whether gasoline supplies will be adequate to meet demand.
"We are looking at strong demand," said John Person, an independent energy trader and president of NationalFutures.com. "We're below the five-year average (for gasoline supplies)."
John Kilduff, an analyst with Man, said the runup in gasoline futures on Monday was in part due to the expiration of the May contract. When a contract expires higher than short-sellers had expected, the shorts have to cover their positions by buying at the last minute.
Short sellers bet prices will fall by borrowing contracts early in the month and selling them. They must return borrowed contracts whether prices fall or not. Because gasoline prices have moved higher, a last minute flurry of buying by short sellers to replace their borrowings might have driven prices even higher Monday.
But mostly, Kilduff said, the increase in gasoline prices is, "just reflective of the disastrous situation facing refineries."
Halff attributed some of Monday's tumble in crude oil prices to profit-taking from Friday's big rally.
Olivier Jakob of the Petromatrix consultancy in Switzerland said the Saudi arrests didn't immediately justify a price hike.
"The threat to Saudi oil is a constant underlying one and we do not read yet a new imminent risk," he said Monday.
Halff agrees, noting that traders realized after running prices up on news of the arrests that production had not actually been disrupted.
The market is also watching events in Nigeria and Iran _ key producers where current events have raised concerns about supply disruptions.
"Last week's flawed Nigerian presidential elections continue to add uncertainty to the supply out of Nigeria," said Victor Shum, energy analyst with Purvin & Gertz in Singapore. "And while there are some positive movements on the Iranian front, it is still too early to say how the nuclear issues will be resolved."
In Nigeria, President-elect Umaru Yar'Adua has pledged that securing the oil-rich Niger delta is a major priority of his government. He is set to succeed President Olusegun Obasanjo on May 29 after a vote earlier this month that was marred by violence and widespread charges of rigging.
On Friday, gunmen shot dead two policemen in Nigeria's oil center of Port Harcourt in a failed attempt to kidnap two foreign oil workers. The area has seen an upsurge of armed violence in recent years, most of it the kidnapping for ransom of foreign oil workers.
In other Nymex trading Monday, heating oil futures were unchanged at $1.9135 a gallon, while natural gas prices rose 3.2 cents to $7.863 per 1,000 cubic feet.


Updated : 2021-04-13 10:40 GMT+08:00