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June 24, 2005

Oil Supply

Another piece of bad news:

FT.com / Markets data & tools / Funds - Crude oil prices touch $60 a barrel: US oil futures on Thursday rose above $60 a barrel amid high demand for petrol and diesel in the US and market worries about lack of spare refining capacity.The Dow Jones Industrial Average slid more 100 points as transport shares fell. Delta Air Lines was down 4 per cent, Continental Airlines slipped 3 per cent, and FedEx, which warned on Thursday about rising fuel costs, fell 7 per cent.

The new nominal all-time high was supported with futures contracts for delivery later this year and in the beginning of 2006 trading between $60 and $61. The US Department of Energy reported a jump in consumption in spite of high oil prices. Diesel consumption is up 6.9 per cent in the last four weeks compared with the same period a year ago. Petrol demand is 2.5 per cent up. "Those numbers are incredible strong considering the high prices for both petrol and diesel," said Phil Flynn of Alaron Trading in Chicago.The strong demand has dented US crude oil inventories, which fell last week for the third time in a row, in spite of the Organisations of the Petroleum Exporting Countries pumping at its highest rate in 25 years. 'No buffer stock has been built up during the second quarter and robust demand continues to reinforce our view of the likelihood of further price increases,' said Kevin Norrish, of Barclays Capital in London. The price spike would put pressure into Opec to consider an increase it its production ceiling, only a week after the rising it by 500,000 barrels a day, to 28m b/d...

Posted by DeLong at June 24, 2005 12:25 PM