Oil prices eased in New York Wednesday after a weekly government report showed that U.S. refineries increased their gasoline and crude output, easing concerns about a supply crunch ahead of the summer driving season.
The Energy Department said that refineries operated at 88.2 per cent of their capacity last week. According to Bloomberg, that is the highest level since the week ended Jan. 6.
Phil Flynn, a senior analyst at Alaron Trading Corp. in Chicago, said that the increased refinery output was a “bearish factor” for prices, a sign that refineries might finally be turning a corner. “This data shows that refineries are starting to make some headway.”
U.S. crude oil refinery inputs rose to an average of nearly 15.1 million barrels a day in the week ended April 21, up 343,000 barrels a day from the previous week, the report said. Gasoline production also climbed around 375,000 barrels a day last week, averaging nearly 8.5 million barrels a day.
Meanwhile, stockpiles of gasoline fell by 1.9 million barrels to 200.6 million last week, their eighth straight weekly drop. Analysts were expecting a decline of 3 million barrels.
Stockpiles of gas have now dropped 25.3 million barrels in the last eight weeks and are 5.6 per cent below year-earlier levels. Gas inventories “are now below the lower end of the average range,” the report said.
The government data showed that crude inventories fell by 200,000 barrels to 345 million. Analysts were expecting a drop of 600,000 barrels last week, according to a poll by Bloomberg.
Light, sweet crude stockpiles are 5.6 per cent above year-earlier levels and “remain well above the upper end of the average range for this time of year,” the report said.
Light, sweet crude for June delivery fell 95 cents to $71.93 (U.S.) a barrel in the wake of the report on the New York Mercantile Exchange. Oil hit a record high $75.35, the highest since trading began, on Monday.
Gasoline futures for May delivery were relatively unchanged Wednesday, up a slim 0.4 of a cent to $2.1335 a gallon on the Nymex.
Mr. Flynn said that in the short-term, crude and gas prices may have finished climbing. He noted that it is not unusual for prices to hit their highs ahead of the U.S. Memorial Day holiday.
“I think we peaked out at $75,” he said. “That is a fair price for the concerns that we are facing now.”
On Tuesday, U.S. President George W. Bush called on the industry to build more refineries and urged Congress to speed up the approval process for new refineries and eliminate red tape.
Mr. Bush also gave the Environmental Protection Agency the authority to relax regional clean-fuel standards to attract more imports of gasoline to the United States and to make it easier for supplies to be moved from one state to another.
The U.S. President was reacting to soaring gasoline prices, which make motorists in the world's largest energy consuming mad, putting politicians of both parties on the defensive about what they are doing to address the situation.
Pump prices are about 32 per cent above year-ago levels one month before the Memorial Day holiday, which traditionally kicks off the summer driving season, when demand peaks.
Crude prices have rallied to record highs amid worries about Iran's budding nuclear program and comments by the country's president Mahmoud Ahmadinejad.
In a further escalation of the war of words between Iran and the West, Iran threatened Tuesday to begin hiding its nuclear program if the West takes any “harsh measures” against it — Tehran's sharpest rebuttal yet to a U.N. Security Council Friday deadline to suspend uranium enrichment or face possible sanctions.
In addition to worries about Iran and supply shortages ahead of the summer, crude has gained sharply in the last few months amid geopolitical supply concerns about Nigeria and Iraq.
With files from Associated Press.
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