Oil and gasoline futures rebounded Monday as depressed prices following the previous session’s big declines drew traders back into the market.
„People are looking for bargains, thinking that the sell-off on Friday was overdone a little bit,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Prices received some support from Middle Eastern members of OPEC. Iran’s petroleum minister said there’s no reason for the Organization of Petroleum Exporting Countries to boost production and Saudi Arabia told customers in Asia and Europe that July shipments would be kept below contracted levels.
Analysts also attributed some of the gains to short covering, where traders who previously bet the market would fall bought futures to cover their positions. At the pump, prices continued their decline. The average national retail price of a gallon of gas fell to $3.081 (81 cents a liter), down a cent overnight and off nearly 15 cents from its late May peak. Light, sweet crude for July delivery gained $1.21 to settle at $65.97 a barrel on the New York Mercantile Exchange.
The contract dropped $2.17 a barrel on Friday. Gasoline for July rose 2.42 cents on the Nymex to settle at $2.158 a gallon. Gas futures fell 6.56 cents on Friday. In other Nymex trading, heating oil futures rose 3.03 cents to settle at $1.9291 a gallon while natural gas lost 5.5 cents to settle at $7.608 per 1,000 cubic feet. Brent crude for July delivery rose 96 cents to settle at $69.56 a barrel on the ICE Futures exchange in London. Iranian Minister of Petroleum Kazem Vaziri Hamaneh said crude supplies are adequate, and therefore there is no need for OPEC to boost production.
„There is sufficient crude oil in the market, there is no shortage of crude oil,” he said when asked if OPEC should increase the amount of oil it sells to ease high prices. Oil prices also drew support from reports that Saudi Arabia had notified Asian and European customers that July shipments would be kept at June levels, 10% below contracted levels. But Antoine Halff, an analyst at the brokerage Fimat USA, thinks traders are more focused on the domestic refining industry’s problems than on announcements out of the Middle East.
The bottlenecks that have led to high oil and gasoline prices this year have occurred because domestic refineries have experienced an unusually high number of outages this spring, not because there is a shortage of oil, he said. And there were new reports of glitches at Texas refineries owned by BP PLC, Flint Hills Resources and Valero late last week and over the weekend. Those reports gave traders reason to buy, Flynn said. „What’s a Monday morning without a refinery problem somewhere?” Flynn said.
Halff doesn’t put much stock in such scattered reports, which he terms „impressionistic, anecdotal information.” Of far more importance is the broad picture of the industry that emerges each Wednesday, when the Energy Information Administration releases its weekly petroleum inventory report, Halff said. Last week’s report was mixed, part of the reason prices fluctuated so wildly at the end of the week, he said.
While the EIA reported a bigger-than-expected jump in gasoline inventories, it also reported an unexpected drop in refinery utilization. „That leaves us with a horribly confused market,” said Peter Beutel, an analyst at Cameron Hanover, in a research note. (pr-inside.com)